##ization of prices, financial reform, a revision of government ’ s role in the economy, urban and rural development, and additional areas opened to fdi. see sala - i - martin, x., ( 2006 ), “ the world distribution of income : falling poverty and … convergence, period ”, the quarterly journal of economics, cxxi ( 2 ). see kehoe, t. j. and ruhl, k. j. ( 2010 ), “ why have economic reforms in mexico not generated growth? ”, journal of economic literature, 48 ( 4 ). bis central bankers ’ speeches the potential for success is high in light of china ’ s proven ability to implement necessary and difficult reforms in the past. given china ’ s importance to the global economy, the world is following this process with fixed attention. the implications of financial development the incorporation of financial reform in china ’ s transformation plan is highly appropriate considering its potential benefits. china can take further advantage of common knowledge regarding financial development, such as the following points, which can be gleaned from years of world experience. first, functioning financial markets are a necessary condition for a prosperous economy. many studies based on cross - country, individual - country, and industry levels confirm that greater financial deepening tends to bring about higher rates of economic expansion. 3 second, the market is a cost - effective mechanism for channeling savings to financing. market functioning, in turn, requires competition, with the free entry and exit of for - profit players, as well as the possibility of the failure of institutions which are no longer viable, provided that the stability of the financial system is preserved. markets also require flexible prices, which of course, include interest and exchange rates. 4 third, productivity may be enhanced by opening an economy to foreign investment and the free movement of capital. it is better for financial institutions to be well - developed and adequately regulated and supervised before the capital account is fully freed. flexible exchange rates and currency convertibility allow for independent monetary policy. furthermore, economies with flexible interest and exchange rates are able to accommodate external shocks more easily than those under rigid price regimes, where adjustment relies heavily on quantity changes, including higher unemployment. fourth, financial markets frequently suffer from imperfections, such as asymmetric information, adverse selection, and moral hazard, which can translate into negative externalities to the rest of the economy. the financial system is based on trust and the management of risk. when risk is not appropriately priced,

agustin carstens : dali – mexico ’ s award - winning securities settlement system remarks by mr agustin carstens, governor of the bank of mexico, at the franz edelman prize award, granted to the mexican central securities depositor, s. d. indeval, for developing with the bank of mexico and the instituto tecnologico autonomo de mexico ( itam ) the dali securities settlement system, mexico city, 12 january 2011. * * * susan albin, president of informs ( institute for operation research and the management sciences ). luis tellez kuenzler, chairman of bmv group, stakeholder of s. d. indeval. arturo fernandez, chancellor of the instituto tecnologico autonomo de mexico ( itam ). highly respected dali developing team from s. d. indeval, itam and banco de mexico, to whom this renowned award has been granted. dear guests, ladies and gentlemen : good afternoon. i am very pleased that the institute for operations research and the management sciences granted the franz edelman award to indeval for the excellent job done in developing dali. this recognition is very good news for the mexican financial system. the securities settlement system is key for banco de mexico : we are responsible for promoting the sound development of the financial system, of which the securities settlement system is crucial. one of our objectives as a central bank is to foster the smooth operation of the payment systems. the securities settlement system is not only the largest payment system in mexico, but also an essential component of our liquidity provision mechanism for other payment systems. finally, the securities settlement system is used to compensate and liquidate the monetary policy operations that help us achieve our price stability goal. given the relevance of all payment systems, banco de mexico is constantly striving to adapt the best practices available. in this spirit, we worked together with indeval in the design, construction, and implementation of dali. when we were defining the operating rules for the system, financial intermediaries and indeval wanted a multilateral netting scheme since this would allow them to use the available liquidity, in terms of cash and securities, efficiently. the central bank knew well the advantages of this scheme for a developing market, but also its downsides : if any depositor lacked enough money or securities, it could take hours and complex procedures to redo the multilateral netting process. from banco de mexico ’ s perspective, this