, madame hu was in favor of using reserve requirements instead of interest rates to deal with the evolution of liquidity conditions. for many economists, she argued, this was “ old - fashioned ”, but for china it proved efficient. in fact, the use of the interest rate in segmented, shallow and unconnected financial systems has obvious limitations. this shows that the control of monetary aggregates can be appropriate under certain circumstances in many emerging economies. this underscores a point i usually make about monetary policy, which was developed by marty feldstein. the profession focused so much on rules that the reference to interest rate and to monetary policy appear to be synonymous. marty just claimed that monetary policy will continue to lack the ability to strengthen the economy because of the unusual conditions in the housing sector and credit markets, and because the rates were very low and failed to keep the economy going. central banks have other tools that are perhaps more traditional, but have fallen into abeyance in some countries, such as discount windows and reserve requirements. as you can see, the discussion agenda is long and complex and there is no single optimal approach that could be defined in a vacuum. the coexistence of different policy recommendations was confirmed this morning when two prominent scholars such as bennett mccallum and jan kregel analyzed monetary policy from a theoretical perspective. in our country, we saw an example of commitment to systemic stability in the past few months with the full implementation of the robust and consistent approach launched in recent years. all instruments were available. we focused all our efforts on restoring the money market equilibrium. our system was able to cushion the impact of external disruptions on macroeconomic performance, confirming that the central bank's prudential and countercyclical policies were right, both in the monetary and the financial fields. something similar occurs with the exchange rate channel. in my opinion, the current managed floating exchange rate regime is the most appropriate to weather financial turmoil at this time of our economic history. analyzing the asian experience, zeti has just stressed the importance of foreign exchange predictability for companies to focus their efforts on micro issues. this reinforces my belief that a managed floating exchange rate regime is the only one possible for the current moment of argentina signed by a history of volatility. one of the most distinctive features of the aggregate operating dynamics in argentina has been the recurrent macroeconomic instability episodes. it is no accident that, in the past 25 years, our economy spent over a third

opportunity for debating the federal reserve ’ s mandate. financial stability is a new objective that should be added to the traditional price stability and long term growth objectives. this brings about the question of the effectiveness of monetary policy instruments, such as interest rate or liquidity provision mechanisms, in achieving simultaneous objectives. if there had been more comprehensive mechanisms to deal with cases like this, maybe it would not have been necessary to make such an intensive use of these instruments. as jacob frenkel remarked in the opening session, “ it is not about preventing the crisis but making financial systems more resilient ”. in emerging countries, it was clear that systemic stability had to be maintained, given our history of macroeconomic volatility and recurrent crises. but in the most industrialized countries, where capital markets are deep and highly integrated into the banking system, financial stability was traditionally regarded more as an instrument than as an objective in itself. however, we can now see the fiscal, monetary and financial instruments working “ side by side ” towards a common goal. as mario blejer stated moments ago, “ in times of crisis we need to adapt their action to prevent the crisis from spreading over the rest of the economy ”. current regulatory policies have a procyclical component that must be dealt with in upcoming reforms. jose antonio ocampo ’ s proposals on countercyclical capital requirements have been subject to discussion for some time, and so have moving provisions in the spanish case. in my view, in order to achieve financial stability, we will probably need to reform existing regulations. in fact, several panellists, such as vinals and ocampo, paved the way for a debate on increased policy coordination given the increased interaction of financial markets and the difficulty this implies for independent action. as i see it, this will not stop the increasing financial innovation process but will strengthen the related risk management. in this sense, the degree of interdependence of the global economy in general, and of financial markets in particular, increasingly requires joint international actions. a greater harmonization of domestic and international regulation will prevent regulatory arbitrage from being used to obtain extraordinary revenues, which was one of the causes of the current crisis. cecchetti also dealt with this issue and gave us something to think about — something we also emphasized in the opening address. the central bank interest rate is not a complete indicator of financial conditions. we need to improve financial stability measures. in the case of developing economies