agustin carstens : the quest for successful policy responses to sovereign crises speech by mr agustin carstens, governor of the bank of mexico, at the monetary authority of singapore lecture 2013, singapore, 5 february 2013. * * * introduction good morning. it is a pleasure and an honor to be in singapore, a country that i deeply admire, to deliver the 2013 monetary authority of singapore ( mas ) lecture. i certainly would like to thank managing director ravi menon for having invited me to address such a distinguished audience. as soon as i accepted to deliver this prestigious lecture, i started to think about the topics i should cover in my talk. central banking related issues seemed a logical choice. but what novelty can you uncover for a country that has the enviable record of an annual average rate of growth of 6. 2 percent and an annual average inflation rate of only 1. 9 percent during the last twenty years, that is ranked as the second most competitive country in the globe according to the world economic forum, and that basically follows best practices in all fronts? a traditional speech about central banking and monetary policy would have been akin to lecture michael phelps about how to win gold medals in olympic swimming competitions. these considerations made me decide to concentrate on the economic and financial crisis that started in 2007 in the advanced economies and then spread to the rest of the world. given the magnitude and severity of the crisis and its adverse impact on economic activity, it has been characterized as the worst financial crisis since the great depression. unfortunately, the world economy has not been able to fully pull out of it, and we should be prepared to further face an environment where weaknesses and vulnerabilities persist for a while – and i am talking here years, not just months. this factor is particularly relevant for countries like singapore and mexico, whose economies are very open, and therefore their performance in many aspects depend critically on the state of the world economy and the international financial markets. * * * let me start by presenting my view on the world economy, focusing on the epicenter of the crisis – the advanced economies. the crisis erupted in full in late 2008, at the time of the lehman brothers collapse. the virulence of the consequences of this event brought a sense of common purpose among the most important countries in the world. in foras like the g20 and the fund´s imfc a coordinated policy response was instrumented, having as main objectives to stabilize financial markets so as to restart the intermediation of financial resources

agustin carstens : emerging markets text of the bagehot lecture by mr agustin carstens, governor of the bank of mexico, at the buttonwood gathering 2013 “ searching for financial stability ”, the economist, new york city, 30 october 2013. * * * it is a great honor to have been invited to deliver this bagehot lecture. quoting from neal irvin ’ s book the alchemists, “ among central bankers ( walter bagehot ) has achieved iconic status for his 1873 book lombard street : a description of the money market … to this day it remains something of a bible for central bankers dealing with a financial panic. ” given that bagehot is our “ galileo ” in central banking, that this year ’ s buttonwood gathering theme is “ searching for financial stability ” and that i am a central banker, i decided to devote my speech to addressing the challenges that emerging market economies ’ central banks are facing in today ’ s extraordinary times. let me start by stating that central banking has become interesting and fun again. not more than six years ago, it was simple and boring : in the conventional view it dealt with one main objective, – that is, keeping inflation under control, – and in a few cases with the additional objective of abating unemployment ; the central bank was the main institution within the state with the mandate to achieve such objective ( s ) ; and it was also empowered with the instrument to achieve this, namely the capacity to set a short term reference interest rate. the flexible inflation targeting regime seemed to work extremely well. asset price considerations and financial stability tended to play a secondary role. but this ideal world changed substantially, and indeed abruptly, in 2008 with the financial crisis that erupted just a few blocks away from here. advanced economies entered into a major and ongoing crisis. in a context of profound economic, financial and political problems, central banks in advanced economies have played a leading role in the crisis resolution process - a role that some experts claim has “ overextended ” or “ overburdened ” central banks. oftentimes one hears in some regions and countries affected by the crisis that they, the advanced economies ’ central banks, are “ the only game in town ”. all these events certainly have had an impact on emerging market economies ( emes ). it is true that during the crisis emes have in general performed well, and they have proven to be resilient, based on strong fundamentals. no doubt emes have