for example, the sensitivity of emerging markets ’ asset prices to changes in global risk appetite or in safe havens ’ interest rates, has increased substantially since the gfc. this correlation has proved to be even higher in episodes of high volatility. it is important not to forget some of the key benefits from cross - border financial integration, since capital inflows complement local savings, provide a larger availability of financial resources for the economy and foster economic growth. additional benefits from financial integration may be obtained, conditional on the institutional arrangement of each emerging market. for example, in mexico ’ s case non - resident capital flows have played a key role in developing local financial markets, diversifying the investor base and improving the price - discovery process in fx, debt and equities markets. this is particularly valuable when local and non - residents face uncorrelated shocks, but may pose considerable challenges when facing a material common risk factor ( like in a “ flight to quality ” episode ). this is more relevant when the institutional set - up combines a highly open capital account and a deep and liquid fx market in your local currency. thus, even - though financial globalization has clear benefits for emerging markets, it also entails additional trade - offs and potential spillovers from external macroeconomic shocks, since domestic financial conditions are more influenced by global factors. in fact, these costs have led some to even consider that restrictions to the free movement of capital or the socalled capital flow management measures may be a viable alternative, even when using such restrictions on capital may significantly push - back the development of local financial markets. therefore, i believe it ’ s better to aim for the first - best, develop deep and liquid local markets with efficient price discovery processes. also, this is a more time - consistent and better long - term alternative to reduce both the likelihood and the impact of capital flow reversals. to attain this, it is also critical to : i ) develop a fully convertible fx market with a deep derivatives market and incentives for adequate risk management, ii ) maintain strong macroeconomic fundamentals, iii ) promote a stable and resilient domestic financial system, and iv ) promote economic agents ’ sound balance sheets. the recent mexican experience suggests that the benefits obtained from an economy with an open capital account, a flexible exchange rate regime and sound macroeconomic fundamentals outweighs the tradeoffs in terms of increased volatility in domestic asset prices under certain scenarios. recent developments in the global economy having broadly

discussed the benefits and tradeoffs of financial globalization, i would like to talk about the challenges faced by central banks in the current juncture. as we all know, in 2019, the global economic environment was marked by uncertainty. global growth recorded its weakest pace since the gfc. this reflected the effects of protracted trade tensions, high geopolitical risks and idiosyncratic factors in key emerging market economies. in this context, while some recovery is expected in the global economy, growth prospects for 2020 have continued to be revised downward. 2 this weak economic outlook, along with the persistence of inflation below most central bank ’ s targets, has led to more accommodative monetary policy stances in advanced and emerging economies. the easing of global in particular, analysts ’ consensus expect the united states to grow at a slower pace in 2020, reflecting an expected return to a neutral fiscal stance and anticipated fading support from further loosening of financial conditions. meanwhile economic growth is projected to remain subdued in the euro area and in the united kingdom on the back of the decline in economic sentiment indicators, which reflects the ongoing weakness in global trade in an environment of continued global uncertainties. financial conditions registered since last september, the recent decrease in uncertainty coming from lower trade tensions and diminished fears of a hard brexit, has supported investors ’ risk appetite, which has increased capital flows to emerging economies, particularly to fixed income assets. however, towards the end of 2019, financial markets in some latin american countries were briefly affected by social and political tensions that complicated the outlook and increased the challenges for economic policy management. despite the improvement in global financial markets, there have been volatility episodes generated by geopolitical tensions and, more recently, from the outbreak of the coronavirus ( covid - 19 ). this adds to the list of downside risks to global growth and has generated the expectation that monetary policy easing in advanced economies will be maintained, or even increased. challenges for the conduct of monetary policy in this context, i would like to discuss some challenges that central banks face when conducting monetary policy. first, in the case of advanced economies, against a backdrop of high levels of household and government debt with low inflation and already low levels of interest rates, monetary policy space has diminished significantly. in this regard, economic literature is advancing towards the explicit modelling of the pervasive effects of a large stock of debt on aggregate demand ( “ indebted demand theory ” by mian, stra