##lateral actions were taken in order to tackle the crisis. for instance, the coordinated policy rate cuts at the beginning of october 2008, by the u. s. federal reserve, the european central bank, the bank of england, the bank of canada, the swiss national bank and sweden ’ s central bank. later, u. s. dollar liquidity facilities, which had been established by the u. s. federal reserve and other central banks of advanced economies, were expanded in order to include emerging economies, such as mexico, brazil, korea and singapore. in europe, injections of capital into the banking system in various countries were agreed upon, as well as the commitment to jointly confront the crisis. regarding fiscal policy, several advanced and emerging countries started to implement countercyclical programs to stimulate the economy and to foster a faster recovery, taking into account that a broad simultaneous stimulus would yield better results relative to unilateral increments in public spending. additionally, efforts were made to strengthen the international financial architecture in several international forums, aimed at designing a system which would allow a timely, efficient and coordinated response during global episodes of stress. these turbulent episodes showed that international coordination in implementing policies is more productive and efficient than unilateral implementation. this thesis is not only widely supported by academic literature, but also by recent and even current experience : in times of crisis the benefits of coordinated action are more than evident. a multilateral response has positive externalities and the costs of not acting in concert are much higher, such that the different parties have sufficient incentives to strengthen their cooperation. thus, the challenge is to design international arrangements, which facilitate greater cooperation among our countries. in this sense, the existence of international institutions and forums that contribute to the early identification of risks and signs of instability are of utmost importance. bis central bankers ’ speeches in latin america and the caribbean we should continue to strengthen the dialogue. the first point in order to understand the importance of this collaboration is the lack, the great deficiency, of a consistent theoretical framework to analyze the role that the financial sector has in economic activity and its function in the propagation of crises. despite all the progress made in order to model the contagion through trade, as concerns the financial channels, it seems as if we spoke different languages. there is no consistent framework that would provide us with a standard model to set up our discussions. there does not even exist, i need to point out, a common terminology. unfortunately, it is

a sound banking sector, liquid and well - functioning capital markets are important for the sustainability of nominal convergence. on the one hand, well - functioning banking sectors and capital markets ensure efficient financing of capital accumulation in the economy, thus supporting potential output growth. on the other hand, they sustain the smooth functioning of the monetary policy transmission channels, such as the interest rate and bank lending channels. in this regard, financial sector vulnerabilities pose great challenges for the conduct of monetary policy. bis central bankers ’ speeches conclusions let me draw to a close. the experiences of the past few years have shown that participation in a monetary union places important demands on national economic policies. euro area governments are hard at work responding to those demands. they are correcting macroeconomic imbalances. they are establishing a stronger framework of governance to keep countries on the path of sustainable convergence. and they are improving the institutional set - up underpinning monetary union. for those eu members that have not yet adopted the euro, the challenge is to achieve a high degree of sustainable convergence with the euro area. this requires credible commitment on the part of their central banks to achieve price stability and treatment of exchange rate policies as a matter of common interest. for the members of the euro area, the challenge is to achieve full compatibility of their economies with participation in monetary union. product and labour markets must possess sufficient adjustment capacity to buffer shocks while maintaining high output and employment. it is in this area that progress is most needed. as i have indicated, much work remains to be done – in both the current and prospective members of the euro area, and both individually in each eu member, and jointly across europe. but i have no doubt that this opportunity to continue progress will be seized and that together we will reap the benefits of sustainable economic convergence and lasting regional integration. thank you for your attention. bis central bankers ’ speeches