of sweden, and the swiss national bank announced a reduction of their policy interest rates to counterbalance deflationary pressures and an economic slowdown in these countries. in my opinion, this joint intervention signaled the return of monetary stability as an important objective of central bank cooperation. hence, today, central bank cooperation is aimed at maintaining both monetary and financial stability. finally, financial sector regulation and supervision is a fourth area of cooperation between central banks. while most industrialized countries have separate authorities in charge of financial sector regulation and supervision, in most emerging and developing countries this task is concentrated at the central bank. hence, this area of cooperation is very relevant for our region. as i mentioned, because of technological advancements and financial innovations, the financial markets have become more integrated across countries. to promote financial stability, central banks have been cooperating in the area of financial supervision and prudential regulation. besides central banks, policymakers and other market players also have been involved in these international efforts. one example of successful cooperation among central banks in this area is the basel committee on banking supervision. in addition, central banks participated in the financial stability forum. in our region as well, we have several central bank organizations aimed at promoting financial stability. notwithstanding these efforts, the world economy experienced a major financial crisis in 2007. we are still experiencing the effects of this crisis. in an effort to prevent a collapse of the global financial system, authorities, particularly in industrialized countries, took unprecedented measures aimed at supporting demand and reducing uncertainty and systemic risk in financial markets. meanwhile, through multilateral cooperation and collective policy actions among for examples the members of the g - 20, the effects of this financial crisis were mitigated. this multilateral cooperation and policy coordination has reshaped the cooperation among central banks in emerging and developing countries. economists and policymakers worldwide agree that the weaknesses that led to this financial crisis should be addressed. financial regulation and supervision need to be strengthened to prevent a similar crisis in the future. this will require a number of steps. ( 1 ) regulation should be broadened to include all activities that pose economy – wide risks. ( 2 ) financial regulation will have to focus on strengthening financial institutions ’ management of liquidity and risks. ( 3 ) conflicts of interest should be reduced by making bonuses more consistent with long - term success than with short - term profits. ( 4 ) the transparency of the financial system should be improved. in the area of financial supervision, the focus should be on detecting

setting, and specifies how. the communication should explain and convey, as clearly and precisely as possible, the objective and how it will react to any deviations from that objective. put simply, it should convey monetary policy ’ s reaction function, so as to avoid unnecessary uncertainty. this should give economic participants a better understanding of how monetary policy will respond to new information. thus, they can adjust their expectations about interest rates and inflation of their own accord, and hence their response to new information, such as an unexpected oil price hike. and because they do this, the central bank itself does not have to react as much to the changed economic setting. but what exactly does good central bank communication look like? how extensive and detailed does it have to be? it goes without saying that more communication is not necessarily better communication. complete transparency could also cause confusion more than it helps to shed light on things, simply because of the sheer amount of information. 4 nonetheless, central banks should communicate as precisely as possible, because if their signals are not clear enough, the result can be unwanted volatility in the markets, which can also spread to developments in the real economy. precise communication is especially important in times of great uncertainty, for example if, in response to a crisis, unconventional measures are introduced, used and finally terminated. by having a broad communication approach which uses various channels, the central bank can also prevent specific means of communication, such as the press conference, from receiving too much attention. 5 the press conference, in particular, shows that the financial markets react very sensitively to central bank communication. at the same time, however, monetary policymakers also keep a close eye on financial market indicators as key factors in the monetary policy transmission process. this mutual dependence between monetary policy and the financial markets can cause a problem. 6 this problem has already been vividly described by nobel prize winner paul samuelson, who once compared monetary policy to a monkey seeing its reflection in the mirror for the first time : the monkey thinks that by looking at that other monkey it is getting new information, when really it is just looking at its own reflection. 7 when the financial markets largely reflect central bank communication, the informative value of market signals is limited – and this increases the risk of incorrect monetary policy decisions if a blind eye is turned to these interdependencies. the bis ’ s economic adviser, hyun song shin, has also addressed the interplay between financial markets and monetary policy communication, and rightly points