this would make it easier for a central bank to restore full employment when an economic slump occurs. the determination of an optimal target for inflation is a rather difficult endeavor which depends on the particular circumstances of each country. in my opinion, the adoption of an approach whereby the target is increased simply to ease the zero bound constraint on rates carries disadvantages that outweigh by far the possible merits. an increase of the target based on these grounds would imply not only higher levels of actual inflation, but also the potential undermining of hard - earned central bank credibility, and the resulting higher inflation volatility, greater difficulty to stabilize expectations and increases in risk premia. in addition, it is important to bear in mind that the zero bound problem is likely to emerge only under rare circumstances, while the inflation costs would be immediate. furthermore, recent see dale, spencer ( 2013 ), op. cit. see yellen, janet ( 2014 ) : “ monetary policy and financial stability ”, remarks at the 2014 michel camdessus central banking lecture at the international monetary fund, july. see blanchard, olivier, giovanni dell ’ ariccia, and paolo mauro ( 2010 ) : “ rethinking macro policy ”, imf staff position note no 10 / 03 ; and ball, laurence ( 2014 ) : “ the case for a long - run inflation target of four percent ”, imf working paper no 14 / 92. bis central bankers ’ speeches research based on parameter values consistent with us data has shown that increasing the target from 2 to 4 percent would result in net welfare costs, even after taking into account the reduced likelihood of monetary policy being constrained by the zero lower bound on nominal interest rates. 14 to sum up, while it is true that inflation targeting should be further adapted to take into account the lessons from the global financial crisis, it is also clear that this does not imply neither a substantial modification of its fundamental structure nor a question mark on the merits of this approach for anchoring inflation expectations. let me conclude by quoting two phrases from a couple of john murray ’ s articles on it, which in my view provide a splendid closing to what i have just said : “ perhaps inflation targeting will be supplanted by a new, and even more promising alternative. at the present time, however, there does not seem to be any obvious contender. for those who desire monetary policy independence, most of the other policy options have already been tried and found wanting ”. 15 “

part, may have resulted from the abundance of foreign funds. however, a complete exit from the extraordinary monetary accommodation in the united states could be complex indeed. there is no precedent from which to derive lessons. it will likely take several years. implementation of the strategy should be neither premature nor delayed relative to the pace of economic recovery. since future changes in the course of monetary policy or forward guidance cannot be ruled out, maintaining credibility could be challenging. to these difficulties, add the peculiarities of the eventual exit strategies of other advanced countries. therefore, the future external scenario for emerging markets will necessarily involve considerable uncertainty. successive stages of monetary unwinding in the united states see imf ( 2013 ), global financial stability report, chapter 1, imf ; and tillmann, p. ( 2013 ), “ capital inflows and asset prices : evidence from emerging asia ”, journal of banking and finance, 37. for an explanation of the risk premia decompression effect on u. s. long - term interest rates, see banco de mexico ( 2013 ), informe sobre la inflacion abril – junio 2013, august. bis central bankers ’ speeches could imply further downward, not necessarily smooth adjustments in asset prices. at the same time, capital flows from abroad may become much scarcer and even exhibit a sudden stop. nevertheless, portfolio adjustments may affect emerging economies differently according to their fundamentals. in general, it is reasonable to expect that countries with better macroeconomic foundations and growth outlooks may suffer less than those characterized by financial imbalances, stringent external funding needs, overheated economies or asset price bubbles. policy challenges what can policymakers in emerging markets do in order to deal with the challenges of tapering and the eventual exit from expansionary u. s. monetary policy? given globalization, developments in and measures adopted by large industrial countries have always affected the performance and policy options of emerging economies. the present situation is no exception. if the era of unusually cheap foreign funding is indeed over, economic policy in emerging economies must accept that reality, not be oriented towards trying to cancel it, any attempt at which would inevitably fail and likely result in financial instability. a more reasonable policy objective for emerging economies may be to seek to prevent and manage possible problems derived from more restrictive conditions. as each country may be affected differently, the importance of specific alternatives will vary internationally. during the boom, discussions on the role of economic policy were centered on how to