other, the monetary transmission mechanism of asian economies and their monetary reactions to internal and external shocks are also quite different. 43. how then should asian economies pursue asian monetary co - operation? the extent of the diversity of economies in asia points quite clearly to one conclusion and this is that monetary integration is inappropriate, at least for the time being. one can perhaps get a better appreciation of this argument by attempting to apply the maastricht criteria for european monetary union to asia. thus realistically asian monetary co - operation will have to be pursued under a multi - currency environment. asian monetary co - operation is not about monetary integration. the situation argues for monetary segregation, even to the extent, in the case of china, of maintaining two currencies in one country : the renminbi for the mainland of china and the hong kong dollar for the hong kong special administrative region. again apply the maastricht criteria to the mainland of china and hong kong and you will come quickly to the conclusion that the “ one country, two currencies ” arrangement is a sensible one. it is essential if hong kong is to continue to be stable and prosperous as an international financial centre, as provided for in the basic law of hong kong. 44. moving along the spectrum for monetary co - operation from the extreme end of monetary integration, we could consider whether some form of monetary policy co - ordination in asia is appropriate. so far, however, there seems to be a lack of interest amongst monetary authorities in asia in promoting this. perhaps there has been no such need identified. monetary sovereignty has been carefully guarded in this region. there is also concern, i suppose, on the likelihood of dominance in such co - ordination by the more influential economies in terms of size and financial clout. there has therefore been no attempt to identify the pros and cons of monetary policy co - ordination in asia. the subject has not even featured in any of the discussions amongst the regional central bank groups that i know of. but one must of course keep an open mind on the subject. the contagious turmoil in the currencies and financial markets of asia will i am sure stimulate some interest in it. without pre - judging the outcome, i expect some initiative in putting the matter on the agenda for future discussions amongst monetary authorities in the region. 45. by contrast, there is a great deal of enthusiasm amongst monetary authorities of the region to promote asian monetary co - operation when this does not inhibit the freedom

the secretariat to the esrb and give analytical and organisational support. the crisis is forcing us to undertake careful analysis to identify where mistakes were made, and to correct them, even in the face of resistance from the political domain. at the same time, however, we should also identify what has proved itself to be of worth and what should be maintained as is. at the macroeconomic level, as i have already said at another occasion, there is one conclusion that should certainly not be drawn from the financial crisis, namely that higher rates of inflation should be targeted in future. there are no discernible macroeconomic benefits that would compensate for the obvious costs of increased inflation – higher risk premia and higher long - term interest rates, to name just two. and we should never forget that low inflation preserves the purchasing power of our most vulnerable and poorer fellow citizens. the financial crisis has not brought about any change in this fundamental assessment : contrary to the fears of some critics, the non - conventional monetary policy measures taken by the ecb had exactly the desired effect, even in an environment of temporarily negative inflation rates, so that they can now – given the normalisation of the outlook for inflation and the prospect of a general market recovery – be phased - out, step by step. the ecb will uphold its definition of price stability. one characteristic of the ecb and the national central banks of the eurosystem is that their activities are oriented towards the long term. in an environment generally characterised by short - term horizons, the ecb ’ s long - term approach differentiates it from what occurs in both general politics and the private financial sector. it is not surprising that political behaviour in democracies is strongly dependent on election cycles. in the field of fiscal policy in particular, this might encourage short - term action focused on election dates, resulting in a tendency to engage in deficit spending and growing government debt. as emphasised in the political economy literature, this short - term approach is, in fact, built into the political process itself, which demands that political actors are re - legitimised by means of elections at regular intervals. however, short - termism can and should be corrected through fiscal rules that work towards the sustainability of public finances. examples of this include the stability and growth pact and the recently agreed, and much to be welcomed, “ debt brake ” built into german law. activity in the private sector is often governed by the quest for short - term profits. seeking profits