17. 11 what should emdes do? in my view, the adage “ there are no easy answers but there are simple answers ” seems to apply, underscoring the appropriateness of looking at what we have learnt from the past and putting into practice the lessons from episodes such as the gfc. indeed, most of the conclusions derived from these experiences remain valid today, i. e. strong macroeconomic foundations, solid financial systems, flexible policy frameworks and a firm basis for sustained growth are the best antidote to an adverse external environment. in fact, the current episode of volatility is once again showing that rather than looking for magic formulas, countries should concentrate on meeting these requirements. furthermore, the need to adhere to this path is far more evident at present, since the complexities of external conditions, if anything, are likely to accentuate in coming years. having said this, it is also clear that the responsibility for overcoming the current difficulties, and more generally for ensuring a healthy evolution of the world economy, does not lie on emdes only. in fact, we should bear in mind international monetary fund ( 2018 ) : world economic outlook, april. world bank ( 2018 ) : global economic prospects, june. that the challenges faced by the world economy today are mostly a result of actions undertaken in aes. indeed, these countries have a fundamental responsibility in ensuring that their monetary policies are properly implemented and communicated ; in avoiding inadequate fiscal - monetary policy mixes ; in adopting any measures needed to increase productivity and the potential for growth ; in properly taking into consideration the international repercussions of their policy actions in the monetary and other fronts ; and in leading by example to continue with the push towards a more integrated world economy. in the face of financial turmoil resulting fundamentally from policy measures in the aes, like the current one, it could hardly be argued that the implications of such actions should not be exaggerated.

remarks by javier guzman calafell, deputy governor at the banco de mexico. panel on “ end of qe and rising interest rates : implications for advanced and emerging market economies ”. ubs 24th reserve management seminar. thun, switzerland, june 26, 2018. 1 i am very glad to have the opportunity to participate in another ubs reserve management seminar. i thank the organizers for their kind invitation. over the several years that have followed the outburst of the global financial crisis ( gfc ), emerging market and developing economies ( emdes ) have been able to sustain a satisfactory pace of expansion, with 2018 expected to record the third consecutive year of accelerating activity. the expansion of emdes has been partly nurtured by the aggressive relaxation of monetary policy stances in the advanced economies ( aes ), which implied a significant easing of external financial conditions, as evidenced by the vast amounts of international funds made available to emerging markets at historically low costs. for instance, bond spreads on emde sovereign debt were around 137 basis points lower in 2010 - 2018 than in the years preceding the gfc. given the prolonged period over which such a situation was sustained, as well as the magnitude of the adjustment needed to accommodate the surge in global liquidity, it comes as no surprise that this phenomenon has given rise to a gradual, albeit significant, buildup of vulnerabilities in the global economy and financial system. in fact, since the early stages of this process, warnings the views and opinions expressed in this document are the sole responsibility of the author and do not necessarily represent the institutional position of the banco de mexico or of its board of governors as a whole. have been made about its likely pernicious effects on the performance and stability of emdes and their financial markets, including through the potential acceleration of domestic credit cycles and appreciation of local asset prices ( notably exchange rates ) beyond what fundamentals would suggest. thus, challenges have emerged as this process is reversed. since the onset of the global market correction of mid - april this year, the accumulated portfolio flows ( in both equity and debt ) of foreign capital to emerging markets have been negative. portfolio flows exiting emdes amounted to usd 17. 1 billion over the 40 - day period that followed the start of the event, a figure comparable in magnitude to that observed in the equivalent period after the 2013 “ taper tantrum ” and the 2016 us presidential election ( usd 18. 7 billion and usd 18. 8 billion, respectively ).