of the renminbi ’ s role to rival some of the main ae currencies looks at this stage uncertain. on the one hand, previous experience with the us dollar during the early 20th century shows that major shifts in the international monetary system can occur rapidly. on the other hand, china is still far away from meeting all the above noted conditions to provide its currency with international status, and the road ahead does not seem to be an easy one. in this respect, barry eichengreen has noted that the race to the consolidation of the renminbi as a global currency should be seen as a marathon, and not as a sprint. 5 but irrespective of the above comments, would an international monetary system with more international currencies be stronger than the present one? in my view, with a long - term perspective in mind, the answer is affirmative. for one, the more individual economies that enjoy macroeconomic and eichengreen, barry ( 2015 ) : “ china ’ s money goes global : the how, the when and the why ”, the milken institute review, fourth quarter. financial stability, are open to trade and financial flows, and have deep and liquid capital markets, among others, the more the system as a whole is likely to be sound and efficient. in addition, a higher number of international currencies entails greater possibilities to diversify overall portfolio risk, a certainly valuable opportunity for asset managers, and especially reserve managers. a multicurrency reserve system, once established, will probably reduce the risk of a persistent overvaluation of assets, including exchange rates. to this, one may add more evenly distributed benefits among countries from their role as reserve issuers, such as seigniorage gains and lower interest rates on their debt, as well as a decreased risk of major and persistent global external imbalances. on the other hand, it is important to stress that a multicurrency reserve system, as well as the road leading to it, is not free of difficulties. take the case of renminbi internationalization. this process requires, among other things, a comprehensive opening of china ’ s financial markets to foreign transactions, as well as a floating exchange rate. as shown by recent episodes, any moves in this direction could have unintended consequences, both for the domestic economy and for the global financial system. more generally, experience demonstrates that the process of financial and exchange rate liberalization in other countries may

without limiting market development and innovation. open, liquid, and transparent financial markets are beneficial in this aim. structural reforms and healthy prospects for economic growth are also important. a second strategy, which goes hand - in - hand with the first, is to monitor and manage risks in the aim of preserving financial stability. by financial stability, i mean the absence of interruptions and alterations that could impair the financial system ’ s intermediation capacity. 3 risks to watch encompass significant overheating of the overall economy or crucial sectors, substantial misalignment of asset prices from long - term trends such as in the property market, excessive risk - taking and increasing corporate or household leverage, and extraordinary credit expansion, especially through nontraditional vehicles, including shadow banking. timely corrective action at the detection of any systemic problem is essential. corrective action opens the debate as to what instruments to use to tackle specific complications. in addition to traditional measures such as fiscal, monetary, and bank see, for instance, scholes, m. s. ( 2000 ), “ crisis and risk management. ” the american economic review, 90 ( 2 ) ; and miyajima, k., et al. ( 2012 ), “ emerging market local currency bonds : diversification and stability. ” bis working papers no 391. see, for example, arslanalp, s. and t. tsuda ( 2014 ), “ tracking global demand for emerging market sovereign debt. ” imf working paper wp / 14 / 39. for a discussion of the concept of financial stability, see tucker, p. ( 2011 ), “ macroprudential policy : building financial stability institutions. ” speech given at the 20th annual hyman p. minsky conference, april. bis central bankers ’ speeches regulatory actions, market interference in the wake of the big financial crisis has been invoked under the rubric of macroprudential policies. some countries have opted for active fx intervention or direct management of capital flows. although these measures may have resulted in short - term benefits, especially in emergency situations, their costs in terms of market distortions and disincentives for sustainable longterm flows may be high. emerging economies suffering from high inflation, excessive fiscal disequilibria, and large current account deficits were hit by severe volatility at the end of last year and beginning of this year, underscoring the importance of the task of preparing for financial turmoil. in short, authorities