open market operations, and what, if anything, has happened to bank liquidity, but they never bring the story to a conclusion, to say what effect policy actions have had on output or inflation, even in the broadest terms. we simply do not have the information we would need to make such an assessment. does that mean we are in a hopeless situation, and that we can do nothing to stabilise the economies of small open economies? i do not think so. however, the search for practical advice, advice that a policy maker can actually put into practice and measure its impact, takes us beyond conventional economics. to begin with, the policy objective of choice should be economic stabilisation, not inflation control. policy makers need to choose as target a variable over which they can have some control. we cannot target inflation at 5 percent if 80 percent of that inflation is imported from abroad, and import prices rise 10 percent. whatever our policy, domestic prices are going to rise at least 8 percent. a more useful objective, in the open economy, is to stabilise external payments and receipts, and maintain a level of foreign exchange reserves which market agents find to be adequate. that creates a stable environment for business and investment planning, and is therefore the best platform for sustained economic growth. as a result, this is an objective which resonates with the companies and households whose collective decisions will result in the outcome of whatever policy is chosen. practical policy requires us to start with this objective, and to find the economic policies that may be employed to achieve it. what might these policies be? first, are there any policies that might significantly increase foreign exchange earnings in the near term? the answer is, not really. the only way to increase foreign currency inflows in the short run is by borrowing, attracting foreign direct investment, or selling assets to foreigners. each of these implies higher commitments of foreign payments in the future, which means that the limits on capital inflows are first, the supply of foreign finance and secondly, the capacity for future debt service. the policy maker ’ s challenge then boils down to this : how can expenditures on imports and other foreign currency spending be brought down to the level of available foreign currency inflows? in economies like the us or brazil, which produce practically everything domestically, it may be possible to persuade consumers to switch from imported to domestically produced items by depreciating the exchange rate or imposing a tariff. in the caribbean, that

opportunities are not foregone by creating the space to explore innovation. this is something that the central bank of barbados has received a proposal for and is now considering. in closing, what is evident today is that : innovation in fintech could have a net positive impact on the financial system, provided that risks are adequately managed. distributed ledger technology has obvious transformative capacity but there are still important challenges to overcome. it is an evolution that presents the opportunity for financial institutions to adapt to market demands and for new market players to join the financial ecosystem. we are still at the preliminary stage of exploring the adequacy of the regulatory framework to ensure that it fits with the new realities and vulnerabilities, in this new paradigm. this is the time for active engagement between financial institutions, new entrants and policymakers, in order for us to work together to create the right landscape that can unlock the gains of new technology. this means some agreement on governance, standards and protocols, as well as a solid legal framework to allow for the best interoperability with existing systems in the financial landscape. on that note, i want to leave you with one other question of interest, “ what do you think people will be saying about distributed ledger technology, fifty or sixty years from now? thank - you for your attention. 5 / 5 bis central bankers'speeches