have high rates of inflation which are out of line with the rest of the world, disruptive capital flows could occur because of fears of currency misalignments. the closer integration of the world economy has therefore focused the ultimate objective of monetary policy and made it even more important to attain this objective. it should, however, also be realised that such a policy stance does not provide unconditional protection against speculative capital outflows. external economic shocks or perceived poor policy measures can still trigger a reversal in capital movements. monetary policy cannot prevent these reversals. international investors make their decisions on the basis of a wide variety of developments, including price stability. the best approach that central banks can follow is to pursue financial stability in a transparent and accountable manner so that they can at least forestall any uncertainties in this regard. although the objective of monetary policy has been better focussed within the context of globalisation, the integrated world economy has resulted in a more complex mechanism for transmitting monetary policy. the relationship between changes in interest rates, money supply and inflation has become less clear under these new conditions, compared with the period when south africa was more isolated from external influences. as a result of large international capital flows, the effects of policy changes are being transmitted to a greater extent through critical indicators such as bond yields and exchange rates. these changes in the transmission mechanism of monetary policy have reduced the credibility of the money supply as an intermediate guideline for policy. the integration of financial markets and financial innovations made the demand - for - money function less stable. this was clearly reflected in a consistent decline in the income velocity of circulation of m3 of about 13 per cent from 1994 to 2000. the income velocity of circulation of m3 continued to decline strongly in the first three quarters of 2001. the money supply accordingly became a less reliable anchor for monetary policy. volatile capital movements further complicate the transmission mechanism under floating exchange rates, because of the impact that exchange rate changes have on the foreign transactions of a country. in a closed economy, the transmission mechanism runs from increases in the repo rate and other short - term interest rates through to longer - term interest rates and asset prices and then to aggregate demand and prices. the open economy version of the transmission mechanism under floating exchange rates runs from interest rates, to nominal exchange rates, to the absolute and relative prices of tradeable goods and eventually to the prices of non - tradeable goods. in view of this more complicated transmission mechanism in a reintegrated global

by side with general education. we need engineers, accountants, pilots, of course lawyers, actuaries, doctors, nurses, scientists and other specialised technical skills for a an increasingly services sector driven economy. and how can i forget economists! mathematics education is fundamental to this. alongside these structural changes in our economy has been the process of global integration of the south african economy. whilst in the 1960s we were mainly an extractive economy, by the 1990s the south african economy was fairly integrating broadly into the world economy. with sanctions out of the way, imports and exports of goods and services amounted to about 44 % of the economy. currently this has increased to 55. 6 %. the manufacturing sector, despite its challenges from time to time saw its exports rise to 29. 6 % in the 1990s to about 37. 9 % in the period 2000 - 2004. one of the most notable features about the globalisation of the south african economy is to be found in the banking sector. south african banks as a percentage of gdp averaged 77 % during the period 1965 - 1994. in 2004, this share of gdp by south african banks was 109 %. the equity market averaged r2 billion in the period 1970 to 1985., r21 billion per year for the period 1986 - 1993, the annual turnover in the equity market was r62 billion in 1994 and in 2004, the annual turnover was about a r1 trillion. market capitalisation on the jse increased from an annual average of r40 billion for the period 1970 - 1980 to r2 trillion in 2004. further more compelling evidence of globalisation is to be found in the performance of the bond market. between 1970 and 1985, turnover in this market was about r8 billion, in 1995 this had increased to r2. 3 trillion and in the year 2004 turnover was r8. 4 trillion. finally the foreign exchange market which interests so many people has also seen some remarkable evidence of globalisation. to cut a long story short, in 1987 the average daily turnover in this market was 1. 1 billion us dollars and during the course of 2005 the average daily turnover in this market in some 12 billion us dollars. so there is a lot of activity going on there. the only conclusion i can come to is that we are coping well with globalisation. we have seen some benefits but yes there has also been some costs such as the impact of globalisation on the gold mining sector. let me conclude by saying that there has been a remarkable achievement in