fallen sharply as global banks reduced the size of their balance sheets after dramatic expansion of their crossborder activities during the pre - crisis boom. on the other hand, foreign direct investment ( fdi ) flows had actually increased slightly relative to the pre - crisis period. the same notion holds for the region as well. financial flows from the region have been much weaker since the global financial crisis. in particular, other investment inflows have fallen sharply and turn into small outflows due to the process of deleveraging. foreign direct investment ( fdi ) inflows also experienced slowdown, however the role of the direct investments in some countries is still strong as they were still going through the " expansion phase " when it comes to this type of flows. portfolio debt flows have increased, reflecting a combination of factors, but mostly as a result of government borrowing abroad by issuing government bonds. chart 8 financial flows and their structure source : imf bop data. financial integration in emerging market and developing economies has risen substantially over the past two decades, delivering benefits but also posing new challenges. guarding against a sudden stop or external crisis requires carefully monitoring of different aspects of flow and stock imbalances. although it seems that flow imbalances narrowed in the region, for completing the picture it is essential to observe the stock positions, as well. in the last couple of decades, the dynamics of the external balance sheet of the region, examined through the net international investment position, pointed towards a process of significant widening of the negative gap, in the run up to the global financial crisis. although, this trend to some extent slowed, iip reached its peak in 2012 and with the beginning of 2013 taper tantrum episode started to reverse. despite the reversal, on average it is still above the some of the benchmarks, such as the norm of the ec within the macroeconomic imbalances procedure, that equals - 35 % of gdp. chart 9 net international investment position source : imf bop data. in order to have the complete picture, more granular view is important, as it can reveal whether the pre - crisis mode of the rising financial exposure elevated the external vulnerability of the region, and hence whether the adjustment which followed was more abrupt and costly in economic terms. for instance, the larger weight of direct investment ( including the intercompany lending ) should in principle improve the external risk profile of the country, as the probability for sudden reversal is low, and in general it does

dimitar bogov : a new normal? the global economic expansion, inflation dynamics, financial stability and its meaning for asset management speech by mr dimitar bogov, governor of the national bank of the republic of macedonia, at the high level international conference on monetary policy and asset management, skopje, 16 february 2018. * * * distinguished guests, ladies and gentlemen, it is my great honor and pleasure to welcome you to the high - level international conference on monetary policy and asset management. the conference has been organized as a joint effort of the national bank of the republic of macedonia and reinventing bretton woods committee. we are delighted for this partnership whose results have been built into the conference program that is both rich in the topics to be covered and in many prominent speakers to lead the discussions. the title of the conference is “ a new normal? the global economic expansion, inflation dynamics, financial stability and its meaning for asset management ” that comes as a timely event to draw upon the lessons learned of the gfc, to assess the current state of the global economy and its future prospects and advice on the challenges facing central banks and asset managers. this decade has been a truly challenging time for policymaking and asset management. the world has gone through financial, economic and debt crises. we have witnessed major central banks using unconventional policies and ultra - accommodative monetary policy stance. what did mark the post - crisis period was the financial system reform mainly with respect to the banking industry and reconsideration of central banks mandate with respect to financial stability. financial turbulence, low yields and divergent monetary policies in the us and the eu caused asset managers to diversify and optimally balance risk and return. the global recovery has strengthened recently, but still there have been concerns with respect to its sustainability. low productivity keeps clouding the prospects of future economic prosperity and growth, and inflation remains muted in many countries. in addition, there are geopolitical risks, risks of excessive indebtedness and financial sector resilience to potential new shocks. all of these critically relevant issues for the policy makers and asset managers will build in our agenda for today. the program will start with a keynote speech followed by four sessions. session 1 will cover issues related to the current and prospective conjuncture of the global economy, monetary policy and the future of interest rates. session 2 will tackle upon financial stability issues, and how well are we equipped to deal with potential turbulence. in session 3, central