financial regulation and economic policies for avoiding the next crisis ( urjit r. patel, governor, 32nd annual g30 international banking seminar, october 15, 2017, inter - american development bank, washington, d. c. ) 1. let me start by reminding ourselves of some numbers that are a key backdrop for today ’ s panel discussion. total global external liabilities have grown from 30 per cent to 190 per cent of global gdp between 1980 and 2015, far outpacing the growth in global trade ( from 19 per cent to 28 per cent of gdp over the same period ). the main vehicle of this new globalisation has been crossborder banking flows, which constituted a third of global capital flows in the decade prior to the financial crisis. in parallel, the global trade network has become increasingly interconnected through supply chains that transcend national borders, and by the advent of new players, especially from the developing world. china now accounts for about 11 per cent of global trade and emerging market and developing countries ( emdcs ) taken together contribute 37 per cent ( up by about 15 percentage points since 2000 ). 2. during the global financial crisis, the explicit pre - crisis assignment of policy instruments to objectives became blurred. the experience demonstrated that macroeconomic policymaking is expected to do a fine balancing act to achieve multiple and, at times, conflicting objectives of monetary stability, fiscal stability and financial stability. within these trade - offs, financial stability has assumed some seniority, entailing for national authorities the constant need to monitor, identify and minimise the build - up of systemic risks in financial systems and reduce spill overs in the most efficient and effective way. this involves a fine dovetailing of the objectives of market efficiency into consumer protection and the management – even pre - emption – of systemic risks. 3. in my remarks today, i would focus on the following issues in the role of financial regulation in averting the next crisis : • • • • globalisation and adherence to global rules / standards − synergies and challenges. financial regulation and suddenness of crisis incidence − regulatory intervention needs to be more anticipatory and data - based. backward - looking versus forward - looking risk - based supervision − need for global systemically important banks to disclose their internal rating models. too - big - to - fail and moral hazard. • adequacy of global financial safety nets ( gfsns ) in the context of the size and speed of crises − gaps and

that my senior colleagues and i devoted an enormous amount of effort to convincing the public of the seriousness of our intent. guy debelle has done a study of the sacrifice ratio involved in reducing inflation in canada, australia and new zealand. for new zealand ( which had a specific inflation target ) and australia ( which did not, at least until after its disinflation had been completed ), that study suggests that the sacrifice ratios were similar. i would not myself want to put too much store by that result. new zealand's inflation performance had been rather worse than australia's for some years by the late eighties, and one would therefore expect to find inflationary expectations more deeply entrenched in new zealand. moreover, just two years into the disinflation process in new zealand the government introduced a 10 per cent goods and services tax, which increased the cpi by an estimated 8 per cent. then, in mid - 1989, that tax was increased from 10 per cent to 12. 5 per cent. both moves presumably had some effect in maintaining inflationary expectations at a relatively high level. although i can not prove it, i believe that the inflation targeting regime did help to change expectations and behaviour at the margin. i well recall that, in late 1990, not many months after the policy targets agreement had seen the 0 to 2 per cent inflation target formally agreed between governor and minister, the head of the new zealand council of trade unions, ken douglas, wrote an article which appeared in one of the major newspapers. the article argued that the reserve bank was focused on an undesirably narrow objective ( namely, low inflation ), but that, as long as that was the case, unions would need to moderate wage demands to avoid increases in unemployment. in the weeks which followed, he actively, and with very considerable courage, campaigned for moderate wage settlements as a way of reducing unemployment. i have little doubt that the inflation target played a part in encouraging " output volatility in new zealand ", in independent review of the operation of monetary policy : reserve bank and nonexecutive directors'submissions, reserve bank of new zealand, october 2000. guy debelle, " the ends of three small inflations : australia, new zealand and canada ", canadian public policy, march 1996. the dominion, 31 october 1990. employers and unions to adjust their wage settlements to levels which were quite quickly consistent with the inflation target. there was also a very large reduction in the spread between the