the risk - sharing properties of cross - border trade in nominal bonds. 32 moreover, in an environment of price stability but persistent rapid money growth and rising leverage, financial liberalisation and integration could lead to the accumulation of financial imbalances over a number of years, increasing the probability of a boom - and - bust cycle in financial markets with repercussion on price stability over the longer term. this possibility implies that monetary policy should place increased emphasis on the preservation of price stability over longer time horizon extending beyond the medium term. with regard to the analytical framework, globalisation can, in principle, affect market structures, agent ’ s behaviour and inflation dynamics, thus requiring close monitoring and careful assessment of its effects. the economic analysis employed by the ecb to assess the short - to - medium term risks to price stability could be subject to greater parameter or model uncertainty as well as increased measurement error associated with unobservable variables, such as potential output, which underlie the assessment of real activity and inflation pressure. however, the econometric evidence in the euro area has not yet identified significant indirect effects, reflecting structural or behavioural influence of globalisation on inflation dynamics. nevertheless, the complexity of economic analysis has increased and its task has become more challenging, and there is clearly a need to better understand and measure the impact of globalisation. in a period of potentially significant structural change in the product and labour markets, crosschecking the assessment of risks based on economic analysis by monetary analysis becomes more important. this proposition is conceptually correct. unfortunately, the influences of financial globalisation on money and credit growth imply that, in practice, monetary analysis is also becoming more challenging and requires increased sophistication. it is necessary to rely on a wide range of analytical tools and models in order to identify the underlying trend in monetary developments and to assess its implications for price stability. at the same time, as i already stressed, in an environment of increased global financial integration, a deeper and broader analysis of developments in monetary liquidity can enhance our understanding of potential risks to financial stability which, if they materialise, can have repercussions for output volatility and price stability over the longer term. for these reasons, pertinent research at the ecb will be further strengthened, including the analysis of the interactions between financial globalisation and innovation, on the one hand, and monetary and market liquidity, on the other, and their potential implications for monetary policy and financial stability.

countercyclical capital buffer. this is a potential capital add - on to bank capital should the committee decide to increase the capital requirement of the banking sector as a whole during an upswing, and should the ratio of credit growth to gdp6 be above its long - term trend. this would then be reversed during a downswing. up to now, this requirement has been set at zero, as the credit gaps are very low. at present, the focus of the fsc is on identifying any vulnerabilities that could cause systemic risk. this is done by monitoring potential risks to the system through assessing various macroprudential systemic risk indicators. these indicators include macroeconomic, financial sector, market - based as well as other qualitative indicators. should any mitigating actions be required, the fsr bill provides the south african reserve bank. ( 2016 ). ‘ a new macroprudential policy framework for south africa ’. gross domestic product page 10 of 12 sarb with the powers to advise and / or direct financial regulators to take certain actions ; this is done through the fsc. having these additional responsibilities comes with its own set of challenges. the expanded mandate of financial stability in itself may have implications for central bank independence. compared to financial stability, monetary policy decisions, while not easy, are nevertheless more straightforward and better understood by the public. these decisions generally involve the use of one tool ( the interest rate ), and there is a clear objective. it is important to appreciate that financial stability is not an end in itself but rather a means to an end, generally regarded as an important precondition for sustainable economic growth, serving the constitutional mandate of the sarb. a financial stability mandate is however more complicated, as it is a shared responsibility. the political economy aspect of this comes out strongly when we distinguish between crisis prevention and crisis management or resolution. the policy tools are more directed at particular sectors, and may therefore be more politically sensitive as the distributional impacts are more apparent than in the case of monetary policy. there could be perceptions of particular institutions or sectors being favoured over others. in particular, crisis management generally involves lender - of - last - resort facilities and / or providing some sort of assistance to banks that need it. these are inevitably quasi - fiscal decisions or actions, as they either directly involve government money or could lead to losses on the central bank balance sheet, which are potentially losses for government. as we saw during the global financial crisis,