standards or excessive bank leverage. a second issue concerns what is referred to by some authors as a “ new central bank paradigm. ” in this view, it is claimed that central banks failed to detect the signs of the crisis and to implement measures to prevent it because their focus on price stability was too narrow. accordingly, part of the problem was the use of incomplete economic models that do not incorporate crucial aspects of the financial sector. the solution to this weakness is then seen as a modification to the central banks ’ mandate so that it includes financial stability in addition to price stability and, in some countries, full employment, making central banks accountable for all of these goals. it is also advised that augmented economic models should be built to guide policy decisions. although suggestions to improve performance are always helpful, including those regarding methodological shortcomings, the intended paradigm revision should be viewed with caution. most central banks already have legal obligations related to financial stability, so a mere change to statutes would not necessarily make much difference. 12 moreover, monetary decision making is only partly based on models, as it considers all relevant available information and combines this with judgment. of course, it is always wise to refine econometric frameworks to include significant relationships. however, by their nature, models are simplifications of reality, so of necessity they omit many factors. simple criteria such as the taylor rule are powerful not because they incorporate everything but because they serve as a robust guide to monitoring central banks ’ commitment to price stability. furthermore, the contribution of price stability to financial stability should not be underestimated. the worldwide conquest of inflation has been an outstanding achievement which has substantially increased social welfare and eliminated a common source of banking for example, the law establishes that the primary objective of the bank of mexico is “ to maintain the purchasing power of the currency, ” and two other ends are “ to promote the healthy development of the financial system and to procure the good functioning of the payments systems ”. crises, especially in emerging economies, such as that witnessed in mexico in the mid1990s. price stability is a necessary condition for avoiding undue banking collapses. this, however, does not preclude the need for central banks to be involved in crucial specific responsibilities aimed at promoting financial stability, applying their expertise in cooperation with other authorities. the third issue centers on the implications of the unprecedented expansionary monetary stance adopted by the central banks of the developed countries, particularly the united states, in the sequel to

remarks by alejandro diaz de leon, governor of banco de mexico, at the 2020 institute of international finance g20 conference saudi arabia, february 22, 2020 good afternoon. i would like to thank the institute of international finance ( iif ) for the invitation to discuss some of the challenges mexico and other latin american economies are facing from the point of view of the central bank. trade integration has been widely debated in the last few years and, going forward, we are likely to see a less global and a more regional trade integration. today, i would like to address some of the challenges associated to global financial integration. this integration has brought, undoubtedly, many benefits. but changes in global risk appetite and the portfolio reactions to idiosyncratic risk factors pose additional challenges and trade - offs for monetary policy. benefits and challenges of international financial integration let me begin by highlighting some trends that i believe are important to understand the context in which emerging markets ’ central banks operate. deeper financial integration among countries has caused not only increased volumes of capital flows but also large exposures through derivatives markets, where non - residents and non - traditional financial institutions play a larger role. according to the bis triennial central bank survey for 2019, global trading in fx markets reached $ 6. 6 trillion per day in april 2019, up from $ 5. 1 trillion three years earlier. 1 the growth of fx derivatives trading, fx swaps in particular, outpaced that in spot markets. in addition, trading in emerging market currencies has increased, reaching a market share of 25 % of the overall global turnover. in the case of mexico, the survey puts the peso as the second most liquid currency in emerging markets with a daily volume of 114 billion usd and 83 % takes place between non - residents, making the peso a global currency. in addition, the persistent accommodative monetary policy stance adopted by central banks in advanced economies since the global financial crisis ( gfc ), has been an important factor leading investors to search for higher returns. thus, foreign investors ’ demand for emerging markets ’ assets has increased considerably. this has helped the development of domestic markets and has diversified the investor base for emerging markets, but it has also increased the exposure to global risk factors and has amplified the this is the most comprehensive source of information on the size and structure of global foreign exchange ( fx ) and over - the - counter ( otc ) derivatives markets. trade - offs when facing idiosyncratic shocks.