the differences in long - run growth performance we observe. savings, investment and average interest rate patterns reflect the long - running fact that new zealanders remain willing to borrow and spend at much higher interest rates than those prevailing in other countries. conducive policy frameworks, including sound monetary policy, help maximise long run growth performance and prosperity – however, what is also needed is savings and investment behaviour geared towards growth. despite spending time looking, we have found no clearly superior alternatives to the flexible inflation targeting approach to maintaining price stability. such things as monetary targeting and fixed exchange rates have been tried before in new zealand, as in other countries that are now inflation targeters. both monetary and exchange rate targeting regimes tend to be very inflexible. they require the burden of many types of shocks to be forced through output, rather than absorbed by the policy instrument itself, and tend to be most suitable for situations where inflation expectations are poorly anchored and the commitment of the central bank to price stability is doubted by the public. another alternative that could appear superficially attractive is to require monetary policy to target multiple objectives such as growth, employment, export and the balance of payments. this was the approach taken in new zealand and many other countries in the post - war period up to the early 1980s. it inevitably had a short - term focus, and resulted in stop - go policies and high inflation. we now know that one instrument cannot succeed in achieving multiple objectives over the cycle. the move to inflation targeting, with its single, clear objective, resulted from the lessons learned in that period. we do not want to re - learn those lessons. conclusions monetary policy – day to day, month to month and year to year – is about balancing judgements in an uncertain world. it is not a precise tool. times like the present are particularly challenging, when there are large and persistent shocks on both the demand and the supply sides of the economy. nevertheless, we believe the inflation targeting framework provides us sufficient flexibility to deal with the short - term consequences of shocks, without losing sight of the essential medium - term inflation objective. the new zealand framework and approach is very much like that used in other economies. the next few years will not be easy, but i believe that the framework is the best available, and that the reserve bank is up to the challenge of applying it flexibly. overall, the framework has been relatively successful. despite the current shocks we are going through, we expect inflation and inflation expectations

u. s. treasury and the recent proposals from the commodity futures trading commission and the sec will be important in deepening our understanding. while acknowledging the role of regulation as a possible contributor, it is important to recognize that this regulation was designed to reduce the concentration of liquidity risk on the balance sheets of the large, interconnected banking organizations that proved to be a major amplifier of financial instability at the height of the crisis. resilience and resolvability this brings me to the last item on my agenda : an update on efforts to strengthen the resilience and resolvability of these systemic banking organizations. with recent and upcoming proposals, much of the new regulatory architecture will be in the process of implementation or in train. even so, i would expect the rules and their application to continue to be strengthened and modified as financial risks evolve, just as i would expect these rules to be increasingly tailored over time to better reflect risk profiles. as a result of the capital and liquidity regulations already in place as well as the associated stress tests, the eight most systemic u. s. banking organizations are now holding $ 800 billion more in high - quality liquid assets than they were in 2011 and $ 500 billion more in common equity capital than they were in 2008. these liquidity and capital buffers are designed to strengthen the going - concern resilience of systemic banking organizations during periods of market volatility and financial stress. in addition, we recently released our proposed framework for determining the application of an additional countercyclical buffer to our large banking firms and made the first determination under the rule. on top of this, the capital surcharge we have proposed, which is designed to ensure the largest, most systemic banking organizations internalize the risk they pose to the system, is estimated to range from 1. 0 to 4. 5 percent of risk - weighted assets, based on 2013 data, over and above the 7 percent minimum and capital conservation buffers under basel iii. indeed, it appears that some institutions may have already reduced their systemic footprint in anticipation of these additional charges. of course, the crisis starkly illustrated that what seem like thick capital cushions in good times can become uncomfortably thin in the face of financial stress. our comprehensive capital analysis and review ( ccar ) stress - testing framework is arguably our most powerful tool for see adrian, fleming, stackman, and vogt ( 2015 ). bis central bankers ’ speeches ensuring that these capital buffers remain robust to a variety