side, credit transfer mechanisms can “ redistribute ” risks, as default losses would be absorbed by a larger number of investors than otherwise. some of the losses may be borne by sophisticated players ( such as hedge funds or some institutional investors ) who are well diversified and can better bear the losses. credit transfer mechanisms also allow banks ( via credit derivatives ) to improve their own risk management and enable them to diversify their risk profiles. however, the use or risk transfer mechanisms can contribute to opacity in the distribution of risks, especially once risks are transferred to unregulated entities ( i. e. non - banks ). this could lead to bunching of risks in particular areas. additionally, the use and constant innovation of credit risk transfer mechanisms has allowed risk to take on more complex forms, making risk less traceable. my final point will be on the resulting challenges to central banks of small open economies. central banks need to understand how globalization affects three main objectives : ( 1 ) the domestic inflation process, ( 2 ) the transmission mechanism of monetary policy, and ( 3 ) financial stability. let me point out at the outset that empirically, there is still some disagreement to the extent of each effect. first of all, it has been argued that the domestic inflation process has been largely changed by trade globalization. in particular, increased trade openness and stronger international competition from low cost suppliers in emerging economies has resulted in lower prices of imported goods and limiting pricing power of domestic firms. in addition, higher international wage competition in labour markets, as well as upward pressure on productivity growth ( albeit this is difficult to distinguish from effects of technological developments ), have provided downside risks to inflation. on the other hand, higher commodity prices due to stronger demand for energy related commodities and industrial raw materials pose an upside risk for inflation. secondly, the monetary policy transmission mechanism has been changed by financial globalization. policy interest rates influence short - term interest rates. but recently, the response of long - term rates to changes in the policy instruments has become less apparent. this raises concerns of whether central banks ’ monetary policy is becoming less effective, particularly given that savings and investment decisions are more influenced by long - term rates. additionally, the conduct of monetary policy has become harder in light of financial globalization. a policy rate increase to tame inflationary pressures may induce further capital flows, thus bringing more liquidity into the domestic market. thirdly, domestic financial stability is to a greater extent affected by global

, accounted for 20, 590 passengers and 257 passengers compared with 21, 272 passengers and 241 passengers in the previous quarter, respectively. 25. on an annual basis, international arrivals at the country ’ s four international airports increased to 679, 172 passengers from 438, 788 passengers recorded in 2009, representing an increase of 20. 27 %. investment 26. total investment pledges were estimated at us $ 1. 0 billion in the fourth quarter of 2010 compared with us $ 110. 4 million in the third quarter. on a sectoral basis, pledges in manufacturing were us $ 377. 3 million, real estate ( us $ 264. 0 million ), agro - processing ( us $ 252. 4 million ), services ( us $ 31. 3 million ), agriculture ( us $ 25. 3 million ), tourism ( us $ 16. 7 million ), construction ( us $ 11. 8 million ), ict ( us $ 8. 8 million ), and mining ( us $ 93. 0 million ). 27. the pledges when fully executed are expected to generate 22, 532 jobs ( 1, 726 jobs : third quarter 2010 ) with the highest contribution from services at 12, 763 jobs followed by agro - processing at 5, 860 jobs. the rest were manufacturing ( 1, 882 jobs ), construction ( 847 jobs ), agriculture ( 397 jobs ), tourism ( 343 jobs ), real estate ( 247 jobs ), ict ( 157 jobs ) and mining ( 14 jobs ). 28. investment pledges for the year 2010 increased by 138. 6 % to us $ 4, 791. 6 million from us $ 2, 008. 4 million recorded in 2009. real gross domestic product ( gdp ) 3 29. preliminary estimates indicate that gross domestic product ( gdp ) rose by 7. 1 % in 2010 from 6. 4 % in 2009. this outturn was well above the target of 5 % announced by the minister of finance and national planning in his 2010 budget speech. 30. the gdp outturn was largely attributed to the growth in the agricultural, construction and mining sectors. the 2010 agricultural harvest was the highest recorded in history, having produced over 2. 8 million mt of maize ; while the mining sector also benefitted from higher copper prices and production levels. the growth in the construction sector emanated from increased residential, commercial and public infrastructure construction projects across the country by both government and the private