economies in the recent tightening cycle points to an increased latitude in managing the impact of the global financial cycle while maintaining some policy autonomy. asean economies weathered the post - pandemic round of interest rate hikes in industrialised economies surprisingly well, avoiding the capital surges and sudden stops they had suffered through during the earlier shocks. what conjunctural and structural factors might explain this apparent improvement? first, the common global inflation shock and resulting synchronicity of monetary tightening across developed and emerging market economies reduced the risk of destabilising capital flows or currency fluctuations. the inflation cycle in asean was also somewhat more contained than in the advanced economies. asean economies reacted to the global inflation shock earlier, and their pre - emptive monetary tightening reined in domestic inflation and reduced incentives for capital outflows. improved communication and orderly transmission of higher policy rates also supported risky asset classes, such as emerging market bonds and equities. 2 second, asean economies had stronger buffers against outflows than in previous cycles. they maintained broadly balanced current accounts and benefited from positive foreign direct investment trends, terms of trade tailwinds and continued recovery in key sectors. with generally strong external positions, asean economies also reduced their reliance on foreign capital, deepening their local currency asset markets and increasing domestic participation in these markets. third, asean economies relied on expanded toolkits to reduce financial stability risks and dampen the impact of the global monetary cycle. over the past few years, most have deployed macroprudential measures to reduce leverage, limit balance sheet mismatches, and discourage the formation of asset bubbles. when regional currencies faced depreciation pressures earlier this year, asean policymakers engaged in discretionary policy management, accepted some currency flexibility, and used targeted foreign exchange interventions and administrative measures to temper currency volatility and capital outflows. extending our perspective to the last 30 years, recent research by mas3 confirms that capital flows to emerging markets in asia – both in debt instruments and more generally – were heavily influenced by the external global financial cycle during the period from 1995 to 2010 – from the asian financial crisis through the global financial crisis. on average, about 45 percent of the variation in capital flows during this period was attributable to external or global factors. however, our research also shows that this influence has diminished over the past 15 years, to the point where a much - reduced 10 percent of the variation in flows can be ascribed to external " push "

forget that adjustments will always be necessary to safeguard prosperity. this is especially true for the european crisis states. bis central bankers ’ speeches but more is required to ensure that monetary union can once again function properly as a whole. from now on, it must not be possible for the problems of individual countries or banks to jeopardise the entire system. an operational framework which reinforces the principle of liability and reduces mutual dependencies brings us a good deal closer to achieving this goal. i would like to thank you for your attention today – but, then, this is something i have always been pleased to receive in darmstadt. i am now very much looking forward to our discussion! bis central bankers ’ speeches