the pandemic shock that are short - lived from those that are longer - lasting. this increases our forecast errors and has significant implications when assessing the appropriate monetary policy response. ii. how would you compare the policy reaction vis - a - vis previous global crises central banks around the globe adopted a myriad of measures to counteract the financial instability and liquidity strains derived from the unprecedented disruption associated with covid - 19. moreover, central banks restored liquidity to the financial markets by providing liquidity - enhancing measures through existing facilities. some emes used unconventional monetary policy measures for the first time, embarking on government bond purchases, and in some cases undergoing necessary reforms to eliminate legal restrictions. even though in the first phase of the crisis central banks had to respond swiftly to avoid bad equilibriums and stabilize markets, i believe we should not over - emphasize the so - called “ market maker - of - last - resort ” narrative. we should not overemphasize our role as a potential buyer of local currency or domestic securities, otherwise we run the risk of amplifying the adjustment process, as we would attract more short - term investors and market players would internalize a “ trigger - happy ” reaction function. we should worry less about palliatives. as emes, we need to stay on course to achieve a stronger, deeper, and more sustainable integration in global trade and financial markets. i believe that, in many instances, emes narrative is crowded by the different range of second 2 / 3 bis central bankers'speeches or third best options available : i ) fx interventions, ii ) the duration of buyer - of - last resort on domestic bonds, and iii ) even capital flow management measures, which are better known as capital controls. ems need to move out of a bad equilibrium of : i ) illiquid fx market, ii ) influential fx interventions, and iii ) domestic financial institutions and corporates ’ unable to withstand large fx swings ; and move towards a better equilibrium of : i ) deep and liquid fx markets that could work as a shock absorber, ii ) less relevant fx interventions, and iii ) financial institutions and corporates resilient to tail - risk fx swings. in terms of policy recommendations, even under the effects of covid - 19, we should remain on course, implementing the necessary policies to achieve more developed markets and avoiding second and third best options. 3 / 3 bis central bankers'speeches

##4, july. bis central bankers ’ speeches vulnerabilities in some countries, such as significant fx exposure, as well as indications of overheating and excess credit, and additional information, especially as monetary tapering proceeds, may uncover further financial imbalances in these or other nations. 5 the beginning of unwinding since last may, there has been a negative change in investor sentiment towards emerging markets, expressed in sharp asset - price drops and heightened volatility. notably, currencies have trended weaker, and domestic long - term interest rates have risen to levels not seen in more than a year. also, portfolio capital inflows from nonresidents have slowed and even reversed, while the duration of foreign holdings of local - currency government bonds in some countries appears to have fallen. the trigger of this shift in sentiment has been the market perception that the federal reserve will soon start reducing its asset purchases and conclude the program by the first half of the following year. additionally, the estimated time before the first hike in the fed funds rate has been shortened. the revisions in expectations were fueled by the fed ’ s forward guidance referenced to inflation and unemployment, official statements suggesting the proximity of tapering, and incoming data revealing improved economic conditions and prospects in the united states. as a result, the u. s. yield curve has steepened, reflecting a higher term premium and thus probably the expectation of a greater supply of long - term bonds, as well as, to a lesser extent, anticipation of increases in the fed funds rate. other industrial nations have also seen similar effects. 6 as was the case during the recent boom, the interest - rate reaction in many emerging markets has been more pronounced than in the united states, revealing additional risk premiums which may be related to credit and liquidity. also, increased global risk aversion and deteriorated prospects for economic growth in emerging economies could be additional negative factors. the possibility that the fed may soon start reducing its asset purchases is a welcome development. the exceptionally loose monetary policy in the united states and other advanced countries cannot be indefinitely sustained, as the costs and risks involved may be rising and surpass the intended benefits. additionally, the decision to taper will ultimately hinge on an improved u. s. economic outlook, which should benefit the rest of the world, including emerging markets. finally, tapering may facilitate the adjustment required in certain economies afflicted by financial disequilibria which, at least in