##rrency government securities in the total outstanding reached record levels before the taper tantrum. since 2014, the trend has clearly declined, although in a moderate fashion, with relatively high levels still the case. see graph 4. despite fears of persistent currency appreciation expressed by policy - makers in emerging markets due to qe in advanced countries, the fact is that on average, appreciation for these currencies has proved short lived. indeed, emerging - nation currency trends have generally been towards weakening. see graph 5. many emerging economies responded to advanced - country monetary expansion mainly in two ways. one was to loosen their own monetary stances. this can be seen by looking at the declining levels of policy interest rates below what different taylor rules dictate since 2003. 7 another response to extraordinary monetary easing in advanced countries has been acceleration of fx reserve accumulation, something which has been significant in emerging economies. this trend has only softened slightly recently, as a result of some countries seeking to avoid excessive currency weakening. see graph 6. one manifestation of probable imbalances in emerging economies stemming from lax advanced - nation monetary policy has been much higher leverage used by corporations. higher corporate debt has been a natural result of better financial conditions. while the use of higher debt at lower rates can be justified on the part of both firms and governments as a way to take advantage of an opportunity, the danger is of a significant deterioration of external conditions, for example, because of a sudden change in market sentiment. this could generate difficulties for debt service and could cause financial disruptions. 8 these risks are more complicated for emerging economies in the present general context of declining output growth and rising inflation. policy trade - offs would be particularly tough in the case of reversed capital flows. see graph 7. outlook and challenges let ’ s now turn to the possible implications for the future. monetary policy in advanced countries is at a crossroads. to begin with, less than fully satisfactory results in terms of output and inflation from monetary accommodation will likely lead to more gradual normalization and even further easing in some countries. in addition, divergence of monetary policy across countries will likely prevail. an important corollary is that the dominant role of monetary policy in advanced countries could result in further postponement of needed adjustments to contain financial risks and structural reforms to enhance productivity growth. see koepke, r. and s. farnham ( 2016 ). “ april 2016 em portfolio flows tracker and flows alert, ” iif portfolio flows tracker

excessive regulation and lack of competition in key areas. current structural reforms have the potential to tackle some of these problems if the new rules and their implementation provide a reliable framework for better regulation and increased competition. on the other hand, the current economic upturn faces several challenges, including those associated with less favorable external conditions. finally, a rise in inflation this year poses risks that should be monitored carefully in order to assure that convergence to the permanent inflation target is renewed soon. bis central bankers ’ speeches