rmb, in our settlement platform, if that is considered appropriate, could be as little as six months. if this strategy is successful, it is not difficult to envisage an increasing proportion of the balance sheet of the banking system denominated in foreign currencies, and the greater use of, say, the us dollar in both the equity and debt markets. i am not sure if this is a dimension covered in professor genberg's paper on endogenous dollarisation, but it is of particular relevance to hong kong. the third paper, to be presented by professor kumhof, deals with issues regarding price dynamics. professor kumhof's paper focuses on pricing policies and inflation inertia, at a time when we are experiencing deflation in hong kong : i am sure, however, that there are insights that we can derive from the paper and the discussion. research on price formation is high on the agenda of the hkimr and the hkma, and possibly in academic and other organisations active in economic research in hong kong. we have had deflation for some five years now and we are still debating the relative importance of cyclical and structural factors behind that deflation. there is also debate on whether measures could and should be taken to limit the damaging effects of deflation, notwithstanding the fact that hong kong is a highly externally oriented economy. views on price dynamics will contribute to these debates. as you know, the hkimr was established by the hkma. this reflects the importance we attach to thorough analysis of monetary and financial issues that hong kong is facing. developments in the local, regional and global economies provide many opportunities for hong kong, but also serve as potential sources of risks. it is therefore critical that we actively seek to understand these developments. to promote economic research of the highest quality, it is essential that the research activities of the hkimr are, and are seen to be, carried out freely, without interference from interested parties, including the hkma. it is therefore not desirable for the hkma to exercise control of the hkimr's day - to - day activities. but, of course, the professional quality and academic integrity of its activities need to be monitored and ensured. for this reason, a council of advisors, whose members are all distinguished economists working in and outside of hong kong, has been established. many of them are in fact here today. the role of the council is to ensure the quality of the hk

falls in gdp and high unemployment. central government finances can be weakened so much that the country enters a debt crisis. from this point of view, it may be considered justifiable to make every effort to increase the resilience of the financial system. at the same time, it is important to always compare the cost of various types of measure with their benefit, so that we can design the most efficient system possible. i have presented a long list of possible instruments that could be used to conduct macroprudential supervision. by necessity, this list will include most tools, as different tools are needed to counteract different systemic risks. but we are discussing something that is relatively new. at present, we only have limited experience of conducting macroprudential supervision in practice. this means that the process of introducing macroprudential supervision will entail a certain degree of trial and error. quite simply, we will have to test our way forward, while constantly doing our best to assess the efficiency of the instruments being employed. 13 the financial system is complex and dynamic, and the risk outlook is changing all the time. this means that it can never be determined with certainty where a financial crisis may arise. bearing this in mind, it is important that we, in sweden, construct a framework for macroprudential supervision that is flexible and that we do not limit our possibilities in terms of the instruments that can be used. it is also important to establish a process to evaluate and later develop and modify the toolbox. i consider that a clear but, at the same time, flexible framework for macroprudential supervision will create the best conditions to counteract future financial crises. but this is not to say that this would be enough to ensure that no financial crisis ever occurs again. the crises of tomorrow will probably have completely different causes to the crises of yesterday, making them difficult to protect ourselves against. however, the scale of the costs of a financial crisis justify making every effort to protect ourselves. as regards the question of where responsibility for macroprudential policy ought to lie, it is clear that this area is closely linked to both the riksbank ’ s and finansinspektionen ’ s activities. the riksbank has been analysing the stability of the financial system for fifteen years and also currently provides recommendations for safeguarding it in its financial stability reports. finansinspektionen also works for the stability of the financial system but with a focus on