account reversal, each episode of massive capital inflows, each sudden stop in capital inflows and each financial crisis has particular features. however, they do have some things in common, irrespective of the country or the period of occurrence. we show particular interest in such common features in terms of the dynamics of selected indicators, such as gdp, real exchange rate, inflation and current account both before and after the end of an episode of large capital inflows. certain patterns relating to the dynamics of the aforementioned indicators can be identified based on the results described in the literature, the latest ones belonging to reinhart and reinhart ( 2008 ). since the pattern of these dynamics during the episode of heavy capital inflows has been described both in general and in the particular case of romania, the focus will be on a matter of utmost interest these days, namely the likely trajectory of the abovementioned indicators after the cycle of large capital inflows ends. following the methodology of various other works, figure i sets out the developments in current account, gdp, exchange rate and inflation in a stylised manner four years ahead and four years after the end of the episode of large capital inflows. chart 1 in figure i depicts the evolution of the current account deficit prior to the end of the episode of sizeable capital inflows ( “ 0 ” on the horizontal axis ). this depiction reflects the identity typical of the balance of payments, namely that the current account deteriorates during the episode of massive capital inflows. at the same time, the end of the episode of heavy capital inflows overlaps the initiation of current account adjustment towards levels seen in the run - up to the reversal. the v - shaped pattern of current account developments is sharper in low - and middle - income countries ( reinhart and reinhart, 2008 ). in line with expectations, real gdp growth is relatively high during a capital flow bonanza and is followed by a sudden drop in the year when the episode ends and a relatively fast recovery thereafter. in other words, subsequent to the end of the cycle of heavy capital inflows, the gdp trajectory is v - shaped, as illustrated in chart 2, figure i. the attempt at identifying a pattern on how inflation fared was the most difficult, because the data presented in the literature vary to a great extent, which could be an indication of the major role played by monetary policy both before and after the large capital in

mandate and the modified framework of its operations. the most important structural changes were triggered by • the establishment of the eurosystem, • the functional transformation of the international financial markets, and bis central bankers ’ speeches • the growing importance of emerging market economies for global economic developments. in particular, our international cooperation within the g20 and the financial stability board made it a matter of urgency for us to adapt our representative network. at the same time, our view of gathering necessary information has changed – alongside macroeconomic aspects, micro - as well as macroprudential issues have become increasingly important central bank activities. furthermore, national and international financial markets have gained in significance. 2. the job of bundesbank ’ s representatives the bundesbank ’ s network of international representatives is there to comprehensively observe economic developments and the expected evolution of financial markets from within key countries and regions. our representatives ’ main tasks include observing and analysing the financial system, and not least detecting financial crises early on, should they arise. even minor flaws confined initially to the local economy can rapidly take their toll on any national financial system in an interconnected global economy – and potentially engulf the entire economy. an important lesson learned from the global financial crisis is that isolated national efforts cannot safeguard the stability of our financial system. our representatives are expected to promote the exchange of expertise and nurture fruitful personal networks with central banks, financial authorities, supervisory authorities, banks etc. in their host countries. by the way, a bundesbank representative ’ s place of work is not necessarily in the host country ’ s capital city. in countries where the capital city is not the national financial centre, we chose to base our representatives in the latter, eg new york, sao paulo, mumbai and istanbul. the decision on where to locate each representative and whether to base them at german embassies or consulates general is based on technical criteria, the interests of the bundesbank and an agreement with the german foreign office. this raises the question of why our new representative to south africa is located in pretoria, and not in your financial centre johannesburg? the reason for this decision makes sense at first glance : johannesburg is in the vicinity of pretoria, and the german embassy is located in pretoria. what is more, the headquarter of our colleagues from the south african reserve bank are also in pretoria. i shall come to this point in a moment to show why this aspect is so important for our representative. 3. why