gradual reintegration of south africa in the global economy. the liberalisation of the foreign exchange market in south africa, the access of more than fifty foreign banks to the south african financial market, and the easier access of south african banks to foreign sources of liquidity, brought major changes to the pattern of financial flows and banking activities. the consequences of these changes for monetary policy must still be digested and analysed in more detail, and some adjustments to the monetary policy model applied by the reserve bank may be necessary. initially, the acceleration in the rate of increase in the money supply had little effect on inflation. the rate of inflation indeed continued to decline to reach a lower turning point of 5. 5 per cent over the twelve months up to april 1996. a sharp depreciation in the exchange rate of the rand after february 1996 provided a new shock stimulus for inflation in south africa and, assisted by a continuous excessive rate of increase in the money supply, the rate of increase in overall consumer prices accelerated to 9. 8 per cent over the twelve months up to february 1997. the reserve bank is greatly concerned about these latest trends in the rate of increase in the money supply, the rate of increase in bank credit extension, and in the rate of inflation. it is accepted that the depreciation of the rand last year must inevitably lead to some price rises, but there is a real danger that these price adjustments ( of internationally tradable versus non - tradable goods and services ) will become embedded in a permanently higher rate of inflation. 3. the monetary policy model the south african experience with the “ monetarist ” approach applied since 1986 was relatively successful. the present threat of a new surge in inflation should not be seen as a failure of the policy approach, but rather as a result of an external shock - - the currency depreciation - - and a severe testing of the monetary policy model in light of the changing macroeconomic environment. central bankers may concur in general on the main objective of monetary policy, namely to protect the value of the currency, but they do not all follow the same strategy in pursuing this objective. the south african model, which is also used by many other countries, is primarily linked to the growth in the m3 money supply, and predetermined guidelines for an acceptable rate of growth in m3 should be seen as an intermediate objective of monetary policy. it is based on the assumption that, over time, there is a link between the

martin redrado : effects of the crisis and different policy responses – emerging vs. advanced economies speech by mr martin redrado, governor of the central bank of argentina, at the money and banking conference 2009, central bank of argentina, buenos aires, 1 september 2009. * * * welcome once again to our already traditional space for discussion in the southern hemisphere. while the agenda covers the most current economic and financial topics, as usual, the aim is more ambitious : to see beyond the short term ; to look through the economic cycle into the medium term, anticipating the challenges that we have in face. the international crisis triggered economic policy responses that were both suited and aggressive. and we have learnt from this framework. in central banking, it has become evident that we need a more comprehensive view including financial stability as a key goal for every monetary authority in the planet. moreover, in contrast with what happened with previous episodes, now emerging countries, have the chance to participate in the decision - making of how to design the new international financial architecture. for example, we take part sistematically in international bodies such as the g - 20 with a view of making an intelectual contribution in the world economy. our knowledge and experience in managing turbulences is valuable and also show that “ there is life after a crisis ”. another example is the participation of emerging economies – and of argentina as a full member since june – in the newly created financial stability board ( fsb ) and basel committee on banking supervision. the fsb is beginning to play a key role in the new system. the inclusion of emerging countries – with more experience in adjusting regulatory frameworks to avert crises or mitigate their impact – will provide a new perspective to the board. we will have higher quality standards and, thus, a greater probability of adequately applying them at the national level. through our direct participation in the standing committee for vulnerabilities assessment, we are working towards opening private sector access to credit, policy sustainability and strategies for exiting the crisis. also, we take part in the basel committee on banking supervision, where we have proposed concrete steps towards liquidity management and the regulatory treatment of currency mismatches. further evidence of increased integration is the currency swap agreements with our colleagues from the central banks of china and brazil. an agreement on contingent liquidity lines in foreign currencies for nearly 12 billion dollars also reflects the confidence of our peers in our monetary and financial system as well as in the policies the central