javier guzman calafell : global divergences - implications for latin america remarks by mr javier guzman calafell, deputy governor of the bank of mexico, at the 2016 institute of international finance ( iif ) latin america economic forum, organized by the iif with the sponsorship of mercantil servicios financieros, during the session on “ global divergences – implications for latin america ”, nassau, bahamas, 9 april 2016. * * * the views expressed in this document are strictly personal. let me start by thanking the organizers for the kind invitation to participate in this interesting discussion. while different paths for the main macroeconomic and financial variables across countries and regions are a normal characteristic of the world economy, divergence has become one of the major subjects of concern more recently. the most important feature in this regard is the observed and expected decoupling of monetary conditions and policy cycles in the main advanced economies, with the united states having recently initiated a rate hiking phase, on the one hand, and japan and the euro area still implementing ultra - accommodative monetary policies with the perspective of further easing, on the other. monetary policy divergence in the advanced economies is the ordinary result of different economic cycles and the efforts of the corresponding central banks to comply with their mandates. in fact, as would be natural to expect, divergence has been a frequent trait of previous policy cycles in advanced economies. to the extent that these policies are implemented efficiently and as required by current and expected conditions, they should be beneficial for the world economy. furthermore, unsynchronized economic and monetary policy cycles in advanced economies would in principle tend to make life easier for emerging market economies, since some of the negative spillovers could be at least partially offset. with this in mind, why is divergence such a source of anxiety this time? in my view, the answer lies in a combination of factors. first, monetary policies in advanced economies have major spillover effects. in particular, asynchronous monetary policies have important implications for the behavior of exchange and interest rates in these countries and, given their systemic role at the global scale, in the rest of the world. the accompanying volatility in asset prices and capital flows is accentuated by the presence of financial market imperfections. the situation looks even more complicated when the insufficient understanding of global monetary policy spillovers is taken into consideration. second, with globalization and in particular the push for less restricted capital

which consists of market participants, experts and regulators. we have also had the benefit of an array of expert views, including those of the ministry of finance which were indeed valuable in giving final contours to the framework. the operational aspects were commendably dealt with by the rbi - sebi standing technical committee and i must highlight the exemplary inter - regulatory coordinative approach that has been the hallmark of the entire process. a similar approach is now being adopted in respect of interest rate futures as well and we may see a fruition of efforts in this regard in a short time. in this regard, i express deep appreciation of the contribution made by sebi, and in particularly the chairman, in bringing this to fruition. i congratulate nse for putting in place the platform in a short time and ensuring a sizeable number of members at the initial start itself. i believe the currency futures market will seamlessly complement the existing otc market. as you may be aware, in all countries, including developed markets, otc segment dominates foreign exchange transactions. the introduction of currency futures, i am sure, will provide further depth and breadth to the market and fulfill their intended objective as an effective risk management instrument. i would also like to take this opportunity to urge all the market participants to leverage this significant milestone for skill development within as well as at a broader industry level. on behalf of rbi, i would like to assure our continued commitment to orderly and well thought out development of financial markets, while maintaining financial stability and integrity.