post framing of the issue. maturity extension merely continued a policy begun by the treasury well before the crisis and was also broadly consistent with the treasury ’ s past behavior at times of substantial increases in borrowing. my starting point would be that the federal open market committee did what it thought was appropriate ex ante to return the economy to full employment and stable prices, taking treasury decisions concerning debt management as exogenous. as the authors acknowledge, there are good reasons to think that any term premium effect of the maturity extension must have been much smaller than the “ 35 percent ” figure implies. the paper ’ s estimate is based solely on what is sometimes referred to as the “ duration removal ” channel. there are other channels that would not be offset by maturity extension – in particular, a channel by which the federal reserve signals the strength of its commitment to achieving the dual mandate. my view is that it is quite difficult to explain the observed the term “ lsaps ” is used here to include qe1 ( that is, the first round of quantitative easing by the fed ), qe2 ( the second round ), the maturity extension program, and qe3 ( the third round ). bis central bankers ’ speeches effects of lsaps on asset prices without reference to these other channels. in addition, according to the authors ’ estimates, the “ announcement effects ” of the treasury ’ s maturity extension policy seem to be only half the size of the effects of comparable fed announcements. the lsaps tripled the federal reserve ’ s share of outstanding 10 - year duration, from 12 percent to 36 percent, and had quite significant effects on the prices of financial assets. by most estimates, the 10 - year treasury term premium was deeply negative from mid - 2011 through mid - 2013 ; it remains near zero today, far below normal pre - crisis levels. given the very low level of rates over this period, it is not clear to me that a slightly more negative term premium would have produced materially different real economy results. third, the authors ’ proposals seem to me to be fraught with risk for the federal reserve. i believe that the existing institutional arrangements have served the public well. the independence of the federal reserve ’ s monetary policy is highly valuable to society. there is considerable evidence that monetary policy independence leads to better macroeconomic outcomes. any active collaboration between debt management and monetary policy, even in a crisis, would risk calling into question that independence. that is a risk i would be

reversal in capital flows engendered by the crisis, strains in banking appeared across asia, leading to severe credit tightening in some countries. fears of counterparty risk disrupted interbank lending in many countries, intensifying already existing funding difficulties. the drying up of the wholesale funding market hurt korea's banking system in particular ; prior to the crisis, it had accounted for about one - third of korean bank funding. in japan, some banks'exposures to equity markets damaged their capital positions. with asian banks experiencing dollar funding pressures similar to those arising elsewhere in the world, the federal reserve established 5 of its 14 liquidity swap lines with central banks in the region : australia, japan, korea, new zealand, and singapore. the reversal in capital flows also caused rapid exchange rate depreciation in some countries, particularly korea, indonesia, and malaysia. the korean won depreciated 40 percent against the dollar from the beginning of 2008 through its trough in march of this year, and it has only partially recovered. over the same period, the indonesian rupiah fell 22 percent against the dollar. exhibit 3 shows the relationship between rates of gdp growth during the downturn, relative to trend, and financial openness, as measured by the sum of each country's international assets and liabilities relative to its gdp. 7 the exhibit shows that, for both asian and nonasian economies, financial openness was associated with greater declines in output, though the linkage appears somewhat less tight than that for trade. 8 again, the most extreme cases are singapore and especially hong kong ( which is not shown, as it is more than twice as open as even singapore ). taiwan is another example of a financially open asian economy that experienced a particularly severe downturn. by the same token, china, india, and indonesia, the three asian countries in which output expanded throughout the crisis, are among the least financially open. trade and financial channels influenced other emerging markets as well, such as those in latin america and eastern europe. many of these economies also contracted sharply, but thus far they have recovered more slowly than economies in asia. in the case of latin america, closer links to the u. s. economy ( especially in the case of mexico ) and greater dependence on commodity exports ( whose prices declined during the most intense phase of the crisis ) were additional sources of weakness. in eastern europe, preexisting a country's international assets are claims on foreigners by its residents, and liabilities