that have intervened more aggressively in foreign exchange markets. our collective challenge is to reshape the international monetary system to foster strong, sustainable growth and improve economic outcomes for all nations. working together, we need to clarify and strengthen the rules of the game, with an eye toward creating an international system that more effectively supports the simultaneous pursuit of internal and external balance. to achieve a more balanced international system over time, countries with excessive and unsustainable trade surpluses will need to allow their exchange rates to better reflect market fundamentals and increase their efforts to substitute domestic demand for exports. at the same time, countries with large, persistent trade deficits must find ways to increase national saving, including putting fiscal policies on a more sustainable trajectory. in addition, to bolster our individual and collective ability to manage and productively invest capital inflows, we must continue to increase the efficiency, transparency, and resiliency of our national financial systems and to strengthen financial regulation and oversight. none of these changes will be easy or immediate. to help us achieve them, we must continue to strengthen our mechanisms for international cooperation, including in the basel committee, the financial stability board, and the group of twenty mutual assessment process, and work together to enhance surveillance by the international monetary fund. i am pleased that our french hosts are focusing the work of the group of twenty on these challenging, but crucially important, issues. i am hopeful that we will make substantive progress on them in the year ahead – an outcome that will strengthen the global economy and benefit all countries. bis central bankers ’ speeches

to date in the advanced economies, the central banks of those economies have generally continued accommodative monetary policies. some observers, while acknowledging that an aborted recovery in the advanced economies would be highly detrimental to the emerging market economies, have nevertheless argued that these monetary policies are generating negative spillovers. in particular, concerns have centered on the strength of private capital flows to many emerging market economies, which, depending on their policy responses, could put upward pressure on their currencies, boost their inflation rates, or lead to asset price bubbles. although policymakers in the emerging markets clearly face important challenges, such concerns should be put into perspective. first, these capital flows have been driven by many factors, including expectations of more - rapid growth and thus higher investment returns in the emerging market economies than in the advanced economies. indeed, recent data suggest that the aggregate flows to emerging markets are not out of line with longer - term trends. second, as i noted earlier, emerging market economies have a strong interest in a continued economic recovery in the advanced economies, which accommodative monetary policies in the advanced economies are intended to promote. third, policymakers in the emerging markets have a range of powerful – although admittedly imperfect – tools that they can use to manage their economies and prevent overheating, including exchange rate adjustment, monetary and fiscal policies, and macroprudential measures. finally, it should be borne in mind that spillovers can go both ways. for example, resurgent demand in the emerging markets has contributed significantly to the sharp recent run - up in global commodity prices. more generally, the maintenance of undervalued currencies by some countries has contributed to a pattern of global spending that is unbalanced and unsustainable. such imbalances include those not only between emerging markets and advanced economies, but also among the emerging market economies themselves, as those countries that have allowed their exchange rates to be determined primarily by market forces for a discussion, see ben s. bernanke ( 2010 ), “ causes of the recent financial and economic crisis, ” statement before the financial crisis inquiry commission, september 2. for a discussion of the international implications of the two - speed recovery, see ben s. bernanke ( 2010 ), “ rebalancing the global recovery, ” speech delivered at the sixth european central banking conference, frankfurt, germany, november 19. bis central bankers ’ speeches have seen their competitiveness erode relative to countries