international assets by about us $ 309. 4 billion in march 2013 as against us $ 250 billion in march 2012, though some improvement has been observed with net liabilities at us $ 296. 9 billion in june 2013. 5. this increasing integration of the global economy is, in fact, far from a phenomenon peculiar to india. in fact, in the years preceding the global financial crisis, global economic integration grew and grew sharply. world trade, as a percentage of global gdp, rose from a little over 20 per cent of gdp to well over 30 per cent in 2007. cross border capital flows, as a percentage of global gdp, also rose from about five per cent in the mid - 1990s to about 20 per cent in 2007. the ratio fell sharply as the crisis emerged but global capital flows have recovered since then. as a result of financial globalization, international financial openness ( measured by the sum of countries ’ external assets and liabilities as a share of gdp ) more than doubled from 150 per cent of world gdp in mid 1990s to 350 per cent in 2007. 2 greater interconnectedness of the global economy was also reflected in, and, in fact, reinforced by the strong increase in international banking activities and the associated rising share of cross - border ownership of financial institutions. according to the international banking statistics of the bis, the value of external assets and liabilities of banks as a share of world gdp doubled, from about 30 per cent in 1990 to about 60 per cent in 2007 with most of this increase taking place in the 2000s. 6. even as globalisation intensified in the early part of this century, the deepening was characterised by some interesting trends and features : i. first, while advanced countries dominated international cross border flows, emerging markets also joined the fray with their share in world capital flows increasing from seven per cent to 17 per cent between 2000 and 2007 ; ii. second, while flows from advanced economies to emerging markets were largely driven by increased investment opportunities in many emerging market economies and by a substantial reduction in home bias in advanced economies, rising outflows from emerging and developing economies were mainly driven by reserve accumulation ; iii. third, the growing globalisation was accompanied by widening global imbalances. the creditor positions of germany, japan, china and major oil producers strengthened while the united states, spain, france, italy and the united kingdom oecd economic outlook, volume 2011 / 1 bis central bankers ’ speeches became more indebted. the absolute sum of surplus

of the ecb ’ s policy response. this led to the introduction of a variety of what we call “ non - standard ” measures to complement the reduction of policy interest rates. john taylor and john williams ( 2011 ) and nassim taleb ( 2007 ). bis central bankers ’ speeches permanent alertness is my lesson on how to deal with the unpredictability of events. but alertness per se may suggest that we should simply be ready to adopt a specific, known reaction, once we observe a certain, possibly unpredictable, event. the problem in situations of “ knightian ” uncertainty is that we are also uncertain in our assessment of the overall consequences of the unpredictable event and how we respond to it. let me again illustrate this point with an example. once the crisis intensified in september 2008, central banks faced the major new difficulty of assessing how the combination of this exceptional event and of the unprecedented response of policy authorities would affect the medium - term outlook. we normally employ various statistical tools to help make this assessment, but would these tools provide useful guidance at this particular time? figure 2 provides an answer showing the evolution of our projections for annual economic growth in the euro area in 2009 together with the corresponding forecasts from a range of private sector and international organisations. observations correspond to forecasts for gdp growth in 2009 made at different points. over the months, information is updated and the forecast horizon becomes shorter and shorter. at the end of 2009, forecasting gdp growth in 2009 is almost tantamount to forecasting the past, so forecasts converge to the actual value indicated by a constant red line. in 2008, all projections were strongly lagging actual developments. only at the end of the year did public and private institutions begin to make downward adjustments to their growth forecasts for 2009, while nonetheless clearly underestimating the actual developments. there is a similar pattern in figure 3, which shows the forecasts for 2010 produced during the period 2009 – 10. in this case, forecasts systematically underestimated the strength of the recovery. in 2009, most forecasters expected very slow growth in 2010. as more positive news emerged in the second half of 2009, the forecasts were steadily revised upwards but still remained well short of the final outcome until the last quarter of the year. the lagging nature of the information contained in most projections, together with the large projection errors, highlight the relative inadequacy of standard tools to deliver accurate forecasts during times of heightened economic distress