, malaysia, maldives, marshall islands, micronesia, mongolia, myanmar, nepal, palau, papua new guinea, philippines, samoa, solomon islands, sri lanka, thailand, timor - leste, tonga, tuvalu, vanuatu, and vietnam. emerging and developing europe. – albania, bosnia and herzegovina, bulgaria, croatia, hungary, kosovo, lithuania, fyr macedonia, montenegro, poland, romania, serbia, and turkey. latin america & caribbean. – antigua and barbuda, argentina, the bahamas, barbados, belize, bolivia, brazil, chile, colombia, costa rica, dominica, dominican republic, ecuador, el salvador, grenada, guatemala, guyana, haiti, honduras, jamaica, mexico, nicaragua, panama, paraguay, peru, st. kitts and nevis, st. lucia, st. vincent and the grenadines, suriname, trinidad and tobago, uruguay, and venezuela. middle east & north africa. – afghanistan, algeria, bahrain, djibouti, egypt, iran, iraq, jordan, kuwait, lebanon, libya, mauritania, morocco, oman, pakistan, qatar, saudi arabia, sudan, syria, tunisia, united arab emirates, and yemen. sub - saharan africa. – countries in the continent that lie south of the sahara desert ( such as south africa ). therefore, for most emes it has been appropriate to throw some “ gravel under the wheels ” via international reserve accumulation to mitigate some of the negative externalities that could take place as a result of the sharp real exchange rate appreciation. even the contained appreciation has had real effects, starting with a deterioration of the trade balance, and going all the way to substantially handicapping some sectors in a variety of countries, such as manufacturing in brazil. we have several other recent examples in this regard. another important reason to accumulate reserves in the face of qe is that it might avoid financial instability in the future. as qe will be temporary, countries should prepare themselves for the reversals of capital, and one way to do so is by accumulating reserves and by building other backstops ( figure 7 ). in addition, rapid capital inflows could be used in bis central bankers ’ speeches the recipient economy in such a way that asset price bubbles or rich valuations could result ; this is of particular concern if such flows are intermediated by the banking system of the recipient country and they lead to a real estate bubble, which, as we

: central bank of mexico using information from bloomberg. the accumulation of international reserves by emes is a phenomenon interesting to analyze in detail. almost two years ago, as he delivered the 12th stavros niarchos foundation lecture, fred bergsten2 said that “ the transmission of all monetary policy occurs to some extent through the exchange markets ”. he is absolutely right. given the sheer size of quantitative easing in the united states, coupled with the one implemented so far in japan, it is not surprising that emes domestic currencies suffered sharp appreciations in response. this is the main reason that some analysts and policymakers have labeled qe as “ competitive easing ”. in a way, the aggressive accumulation of international reserves by emes all the way to late 2013 ( figure 6 ) is at least partially the other side of the coin to “ competitive easing ”. as a matter of fact we might as well call it “ competitive reserve accumulation ”. in most of the cases, i would agree with this practice, given the blunt distorting effects that qe had on emes. the size of capital flows to this subset of countries was much larger per unit of time than the capacity of such countries to absorb them without suffering substantial distortions. see bergsten, fred. ( 2013 ). “ currency wars, the economy of the united states and reforms of the international monetary system ”. 12th stavros niarchos foundation lecture. peterson institute for international economics. bis central bankers ’ speeches figure 6 international reserves billions of dollars emerging and developing asia sub - saharan africa emerging and developing europe advanced economies commonwealth of independent states latin america & the caribbean middle east, north africa 14, 000 12, 000 10, 000 8, 000 6, 000 4, 000 2, 000 2014 q1 2013 q1 2012 q1 2011 q1 2010 q1 2009 q1 2008 q1 2007 q1 2006 q1 source : elaborated by banco de mexico using information from international financial statistics database. international monetary fund ( imf ). * advanced economies. – canada, germany, france, italy, spain, japan, united states & united kingdom. commonwealth of independent states. – armenia, azerbaijan, belarus, georgia, kazakhstan, kyrgyzstan, moldova, russia, tajikistan, turkmenistan, uzbekistan & ukraine. emerging and developing asia. – bangladesh, bhutan, brunei darussalam, cambodia, china, fiji, india, indonesia, kiribati, lao p. d. r.