remarks by mr. javier guzman calafell, deputy governor at the banco de mexico, at the policy panel on “ reformulating monetary policy in emerging markets and the need for macroeconomic policy coordination ”. conference on global environment and policy challenges in emerging markets organized by the central bank of the republic of turkey. antalya, turkey, december 2, 2017. 1 largely as a result of the difficulties faced following the outburst of the global financial crisis, macroeconomic policy coordination has gained increasing relevance in recent years. this has two dimensions. domestically, a context characterized by stubbornly low rates of inflation and deflationary risks, anemic economic growth or outright contraction, as well as monetary policies constrained by the zero lower bound on interest rates, particularly in the advanced economies, underline the need to jointly activate different policy levers in order to effectively overcome such a situation. 2 in a second dimension, the growing and increasingly complex interlinkages in the world economy brought about by the ongoing process of economic and financial globalization have increased the potential for spillovers and boomerang effects of domestic policy measures in the major economies, thus highlighting the importance of coordinating actions at the international level under certain circumstances, for instance, in the presence of global shocks the opinions and views expressed in this document are the sole responsibility of the author and do not necessarily represent the institutional position of the banco de mexico or of its board of governors as a whole. see jazbec, bostjan and biswajit banerjee ( 2017 ) : “ rethinking monetary - fiscal policy coordination ”, proceedings of a seminar jointly organised by the bank of slovenia and the international monetary fund. while the above arguments apply fundamentally to advanced economies, clearly, the importance of an adequate coordination of macroeconomic policies is nowadays more pressing for emerging market economies ( emes ) as well. in fact, the challenges resulting from globalization can be even more acute for these countries. it is also worth noting that the policy response in advanced economies to the global financial crisis has sharply increased the volatility of capital flows to emes, with episodes of large inflows alternating with bouts of outflows. simultaneously, the crisis has reduced the global growth potential, fostered anti - globalization sentiment and, in general, substantially increased uncertainty. in light of the above, the following remarks will focus on the domestic dimension of policy coordination in emes, including measures beyond the strictly macroeconomic realm. the advantages of a coordinated and

the long term that will need to be addressed in due course. 3. thanks in large part to the continued efforts undertaken over several decades, which have gathered momentum since the global financial crisis, mexico ’ s financial system is profitable, liquid and well - capitalized, and supported by moderate levels of private sector debt, including households, and the absence of evident risks of a systemic nature. far from representing an obstacle to its implementation, the health of our financial system has proven to be a most valuable asset for mexico ’ s monetary policy, as it has allowed an efficient operation of transmission mechanisms, and a sharp increase in interest rates without significant adverse side effects on banks or other financial institutions. 4. structural reform policies spanning through a wide array of sectors have made important strides over the last few years. although it may still be too early to draw conclusive assessments of the efforts undertaken, as most of these changes are still in their implementation phase, a number of positive results are already evident. of particular importance for monetary policy are the beneficial effects that increased competition across a number of key markets, and especially in telecommunications, has had on the evolution of domestic prices, both directly and indirectly. the structural reform of the mexican economy is a long - term endeavor that will take several years to fully materialize, whose potential is conditional on its correct implementation, and which needs to be complemented by efforts in other areas. but it is certainly reassuring that the process has, to a significant extent, lived up to the expectations it has generated. all in all, a policy approach encompassing multiple instruments has undoubtedly ameliorated the magnitude of the challenges for monetary policy in mexico. however, as is natural to expect, it has not fully eradicated them. at the current juncture, the mexican economy is facing a deceleration of economic activity, a rapid although expected to decline rate of price growth, and a situation of higher - than - usual uncertainty deriving from a number of factors, of both domestic and external origins, with the normalization of monetary policy in the united states, the renegotiation of nafta and presidential elections in 2018, among them. in virtue of the potentially opposing implications that the realization of alternative scenarios may have for the conduct of monetary policy, it will be essential to adhere to an approach emphasizing prudence and timely action, and the continued support of policy measures in other areas.