that globalisation has been the only factor underlying these price developments, it has certainly played a role through boosting demand for such commodities. in this way, judging globalisation ’ s impact on aggregate prices depends on the balance of these relative price movements. while relative price movements are always present and in this way need not affect aggregate inflation, they could embed short - term aggregate impacts either to the extent that the movements are sizeable or that adjustment frictions and imperfect information imply a prolonged impact. empirical studies estimating this relative price effect suggest a small net downward impact of trade openness on annual consumer price inflation over the period of five to ten years up to 2005. 5 since that time, the balance of relative price shocks as characterised above could very well have become inflationary. while influences on relative price movements of goods and services are among the most visible aspects of globalisation, its influence on inflation, however, does not stop there. a second channel involves the effects of globalisation on prices through competitive forces. prima facie, increased competitive pressures would be expected to both dampen firm profit mark - up behaviour while also potentially altering developments in costs ( such as the cost of capital and labour ) which underlie price dynamics. in contrast to relative price effects, which have a complex, because bipolar, ex - ante impact on inflation, these competitive effects would be expected to unambiguously exert a moderating influence on inflation as long as impediments to competition are not in place. evidence to validate this channel is, unfortunately, fairly difficult to gather owing to the complex nature of the markup formation process along with measurement issues. what we do observe is that the responsiveness of prices to changing demand conditions has, if anything, fallen to some extent over the last decades – which would be at odds with the notion that firms are more active in adjusting their for a detailed look at the macroeconomic impacts of trade globalisation, see the ecb monthly bulletin article entitled “ globalisation, trade and the euro area macroeconomy ”, january 2008 ). see the box entitled “ effects of the rising trade integration of low - cost countries on euro area import prices ” in the august 2006 issue of the ecb ’ s monthly bulletin for further details. see ecb ( 2008 ), op. cit. mark - up behaviour in a competitive environment. in the context of globalisation, there may be reason to believe that, in integrated markets, local labour market

##s, it is worth noting that all parties to this consultation are in agreement that reducing imbalances in a manner compatible with sustained global growth poses a multilateral challenge to be addressed as a shared responsibility. let me now turn to the events we are currently witnessing in the global financial system, which illustrate the vulnerabilities of the system and point to shortcomings on the part of the public authorities as well as in the private sector. with the global financial system still undergoing a process of de - leveraging and risk re - pricing, the risks to global and financial stability should not be underestimated. signs of these risks, inter alia in domestic and external real and financial imbalances, should be addressed resolutely by the relevant parties. it is therefore highly welcome that, in view of the ongoing turmoil, the international community promptly called for a concerted response aimed at identifying the weaknesses, drawing comprehensive lessons and formulating policy responses with a view to strengthening the resilience of the financial system. work has progressed intensively both at the international as well as the eu level. i will highlight the important work being done by the financial stability forum ( fsf ) and its excellent report on enhancing market and institutional resilience, which was recently released to g7 finance ministers and central bank governors. the g7 identified a number of recommendations by the fsf that are considered among the immediate priorities for implementation within the next 100 days. financial institutions, for instance, should fully and promptly disclose their risk exposures, write - downs and fair value estimates for complex and illiquid instruments in their upcoming mid - year reporting. moreover, the international accounting standards board ( iasb ) and other relevant standard - setters should take urgent action to improve the accounting and disclosure standards for off - balance sheet entities and to enhance guidance on fair value accounting, particularly on valuing financial instruments in periods of stress. what is also relevant is that financial institutions should strengthen their risk management practices, including rigorous stress testing, under the support of supervisors ’ oversight. finally, by mid - 2008, the basel committee on banking supervision ( “ basel committee ” ) should issue revised liquidity risk management guidelines and the international organisation of securities commissions should revise its code of conduct for credit rating agencies. additional measures that are to be implemented by end - 2008 relate to strengthening prudential oversight of capital, liquidity and risk management and enhancing transparency and valuation. moreover, the role and uses of credit