: central bank of mexico using information from bloomberg. the accumulation of international reserves by emes is a phenomenon interesting to analyze in detail. almost two years ago, as he delivered the 12th stavros niarchos foundation lecture, fred bergsten2 said that “ the transmission of all monetary policy occurs to some extent through the exchange markets ”. he is absolutely right. given the sheer size of quantitative easing in the united states, coupled with the one implemented so far in japan, it is not surprising that emes domestic currencies suffered sharp appreciations in response. this is the main reason that some analysts and policymakers have labeled qe as “ competitive easing ”. in a way, the aggressive accumulation of international reserves by emes all the way to late 2013 ( figure 6 ) is at least partially the other side of the coin to “ competitive easing ”. as a matter of fact we might as well call it “ competitive reserve accumulation ”. in most of the cases, i would agree with this practice, given the blunt distorting effects that qe had on emes. the size of capital flows to this subset of countries was much larger per unit of time than the capacity of such countries to absorb them without suffering substantial distortions. see bergsten, fred. ( 2013 ). “ currency wars, the economy of the united states and reforms of the international monetary system ”. 12th stavros niarchos foundation lecture. peterson institute for international economics. bis central bankers ’ speeches figure 6 international reserves billions of dollars emerging and developing asia sub - saharan africa emerging and developing europe advanced economies commonwealth of independent states latin america & the caribbean middle east, north africa 14, 000 12, 000 10, 000 8, 000 6, 000 4, 000 2, 000 2014 q1 2013 q1 2012 q1 2011 q1 2010 q1 2009 q1 2008 q1 2007 q1 2006 q1 source : elaborated by banco de mexico using information from international financial statistics database. international monetary fund ( imf ). * advanced economies. – canada, germany, france, italy, spain, japan, united states & united kingdom. commonwealth of independent states. – armenia, azerbaijan, belarus, georgia, kazakhstan, kyrgyzstan, moldova, russia, tajikistan, turkmenistan, uzbekistan & ukraine. emerging and developing asia. – bangladesh, bhutan, brunei darussalam, cambodia, china, fiji, india, indonesia, kiribati, lao p. d. r.

helped engender a downsizing of public ownership of commercial banks in europe, coupled with rapid development of heretofore modest capital markets, changes which appear to be moving continental europe ’ s financial system closer to the structure evident in britain and the united states. continental european countries may gain an additional benefit from the increased development of their capital markets. with increased concentration of national banking systems, which will likely be followed by increased concentration of europe - wide banking, comes the risk of an unusually large impact should the health of a megabank become impaired, causing the bank to curtail its lending. having well - developed capital markets would likely help to mitigate these effects, as more firms would have alternative sources of funds. conclusion improving domestic banking systems in emerging markets will help to limit the toll of the next financial disturbance. but if, as i presume, diversity within the financial sector provides insurance against a financial problem turning into economy - wide distress, then steps to foster the development of capital markets in those economies should also have an especial urgency. moreover, the difficult groundwork for building the necessary financial infrastructure - improved accounting standards, bankruptcy procedures, legal frameworks, and disclosure - will pay dividends of their own. the rapidly developing international financial system has clearly intensified competitive forces that have enhanced standards of living throughout most of the world. it is important that we develop domestic financial structures that facilitate and protect our international financial and trading systems, a process that will require much energy and commitment in the years ahead.