the terminology of the optimum currency area theory, in the absence of country - specific shocks – the need for a monetary policy stance that is substantially different from the one in advanced economies has declined significantly in recent years. as a result, emerging markets – with different exchange rate regimes and pursuing a gradual approach towards financial integration – have been able to combine low inflation with a comparatively high degree of exchange rate stability. ii. how sustainable is the current configuration of the global monetary system? after having reviewed the past, i would now like to turn to future developments and the question of whether the current form of emerging markets ’ participation in the global monetary system is sustainable. and if it is not sustainable, to where will the system be heading? concerns about the sustainability of the current configuration of the global monetary system have been raised for many years, most prominently in the context of the “ global imbalances ” debate. today, i would like to draw attention to a different challenge, namely an increasing divergence of inflation between advanced economies and some emerging economies. this divergence may make it increasingly difficult for emerging markets to smoothly combine low inflation and a high degree of exchange rate stability. there are at least three factors that may explain why prices have recently been rising in emerging markets at a more rapid pace than in advanced economies : 1. the global rise in energy and food prices, as both items have a much larger share in the consumer price indices of emerging economies than in those of advanced economies. 2. strong expansion in monetary and credit aggregates, 7 which may finally feed into a more pronounced rise in emerging market inflation. 3. increasing supply constraints, as the “ vast supply of underemployed workers ” ( dooley et al 2003 ) in some countries may finally be exhausted, at least for certain segments of the labour market. of course, there have been rising inflationary pressures in advanced economies as well. and until july last year, the federal reserve and the ecb responded to these pressures by raising interest rates. the recent financial turbulence put an end to the tightening cycle in the us, with the federal funds rate dropping by three percentage points since august 2007. in europe, ecb monetary policy rates have remained stable. the policy response in the us reflects the high level of uncertainty resulting from the turmoil in financial markets. from a global monetary system perspective, the key question is whether the monetary policy stance in advanced economies will remain appropriate for emerging market economies. if this were not the case, emerging

every k - 12 curriculum in the country. while physical education and even driver education are part of nearly every curriculum, financial education is mandated by only a handful of states as a requirement for graduation. alongside classes that prepare students to join the workforce we need courses that demonstrate how to use the financial compensation from their work to meet family necessities and build personal wealth in an era of complex financial products. students will need to identify situations in which it makes sense to borrow and choose among loan products. they need to know how to budget and save and how to select the best investment vehicles for their savings. and as the recent financial turmoil has taught us, they must understand how to prepare for and deal with financial contingencies such as unemployment or unexpected expenses. jump $ tart supports efforts to provide such an education. the federal reserve is working on several fronts to promote financial education that will help prepare young people to take on the responsibilities of market participants and manage the risks that come with the opportunities to spend, save, borrow, and invest. financial education that begins at a young age and extends through one ’ s life is the most effective preparation for making important financial decisions such as buying a car, purchasing a home, saving for retirement, borrowing for postsecondary education, and even choosing a career. in support of our efforts, the reserve banks have developed programming and curriculum to serve the needs of schools, educators, and students. among them are : katrina ’ s classroom, a free video - based curriculum developed by the federal reserve bank of atlanta that uses the stories of victims of hurricane katrina to teach middle school and high school students and their parents the importance of being financially prepared ; great minds think : a kid ’ s guide to money, a publication developed by the federal reserve bank of cleveland that helps families begin conversations about money ; and several essay and creative writing contests for students sponsored throughout the federal reserve system, designed to promote students ’ development of savings goals or encouraging them to apply economic thinking to a social problem. in addition to providing materials for financial education, the federal reserve has also begun to assess the effectiveness of the education programs it engages in, so that we can better evaluate the outcomes of our efforts. this research is intended to help us better answer the question, “ what works in education? ” so that we may allocate our resources in the best possible manner. while financial education is an important first step in enabling consumers to make informed financial decisions, it is also important that consumers