research, including studies by the bis central bankers ’ speeches international monetary fund, does not support the view that advanced - economy monetary policies are the dominant factor behind emerging market capital flows. 1 consistent with such findings, these flows have diminished in the past couple of years or so, even as monetary policies in advanced economies have continued to ease and longer - term interest rates in those economies have continued to decline. second, the effects of capital inflows, whatever their cause, on emerging market economies are not predetermined, but instead depend greatly on the choices made by policymakers in those economies. in some emerging markets, policymakers have chosen to systematically resist currency appreciation as a means of promoting exports and domestic growth. however, the perceived benefits of currency management inevitably come with costs, including reduced monetary independence and the consequent susceptibility to imported inflation. in other words, the perceived advantages of undervaluation and the problem of unwanted capital inflows must be understood as a package – you can ’ t have one without the other. of course, an alternative strategy – one consistent with classical principles of international adjustment – is to refrain from intervening in foreign exchange markets, thereby allowing the currency to rise and helping insulate the financial system from external pressures. under a flexible exchange - rate regime, a fully independent monetary policy, together with fiscal policy as needed, would be available to help counteract any adverse effects of currency appreciation on growth. the resultant rebalancing from external to domestic demand would not only preserve near - term growth in the emerging market economies while supporting recovery in the advanced economies, it would redound to everyone ’ s benefit in the long run by putting the global economy on a more stable and sustainable path. finally, any costs for emerging market economies of monetary easing in advanced economies should be set against the very real benefits of those policies. the slowing of growth in the emerging market economies this year in large part reflects their decelerating exports to the united states, europe, and other advanced economies. therefore, monetary easing that supports the recovery in the advanced economies should stimulate trade and boost growth in emerging market economies as well. in principle, depreciation of the dollar and other advanced - economy currencies could reduce ( although not eliminate ) the positive effect on trade and growth in emerging markets. however, since mid - 2008, in fact, before the intensification of the financial crisis triggered wide swings in the dollar, the real multilateral value of the

metrics would be tailored to the needs of the local community. this tailoring is not possible with a uniform benchmark that applies to all banks and all communities. the large differences between assessment areas illustrate the importance of tailoring thresholds. for example, in morgan county, ohio, lmi families are 49 percent of the population, compared with 31 percent in o ’ brien county, iowa ( figure 4 ). we believe this tailored approach is empirically sound and avoids imposing arbitrary cra performance measures on a bank and its community. in order to ensure it meets standards of safety and soundness, cra lending must be evaluated in the context of the characteristics of the bank and its community. additionally, the proposed retail lending metric would automatically adjust to changes in the business cycle. as many commenters noted in response to the anpr, a uniform ratio that does not adjust with the local business cycle could provide too little incentive to make good loans during an expansion and incentives to make unsound loans during a downturn, which could be inconsistent with the safe and sound practices mandated by the cra statute. industry commenters also expressed concern that discretionary adjustments to the uniform metric are likely to lag behind the economic cycle and undermine the certainty a metric purports to provide. by contrast, the proposed retail lending metrics are calibrated to contemporaneous changes in market conditions, thereby reducing the risk of providing unsound incentives ( figure 5 ). finally, the proposed approach would continue to recognize local context in assessing a bank ’ s cra performance. if a bank receives the presumption of satisfactory by meeting or exceeding the thresholds, an examiner could consider performance context information, including the bank ’ s responsiveness to the community ’ s needs, in determining whether the bank ’ s performance is outstanding at the assessment area level. likewise, if a bank does not meet or exceed the thresholds, it would undergo a full examination, as it would currently, and could receive any level of rating, including possibly outstanding, based on the full range of performance context considerations and clear qualitative criteria. the metrics would be designed to provide greater certainty, while avoiding rigidity. retail test — evaluating retail services retail services can be extremely important to lmi communities, although they do not easily lend themselves to consistent, comparable metrics. it makes sense to use qualitative criteria related to the responsiveness of a bank ’ s products and services and its delivery systems