are difficult to explain, most notably the low level of term premia. the most plausible explanation relates to a shortage of “ risk - free ” assets although with term premia so low, it ’ s not clear how risk - free they actually are. at the same time as grappling with these developments, investors need to be aware of the changed market dynamics and factor the higher transactions costs in fixed income, and particularly the higher cost of liquidity provision, into their decision - making. bis central bankers ’ speeches graph 1 graph 2 bis central bankers ’ speeches graph 3 graph 4 bis central bankers ’ speeches graph 5 graph 6 bis central bankers ’ speeches graph 7 graph 8 bis central bankers ’ speeches graph 9 bis central bankers ’ speeches

to adopt more pure forms of floating than the industrial countries have been able to sustain, especially when the conditions necessary for a successful pure float are less likely to be present in such economies. even this strategy will be uncomfortable, and is not guaranteed to succeed. large reserves and uncomfortable interest rates might be needed to mount an effective defence, and it will be tempting to mount this defence too early ( not to allow enough flex ). if a concrete example is needed to illustrate the point, singapore provides it. it was, arguably, the most successful country exposed to the full force of the crisis, with a managed exchange rate ( managed both in the sense of intervention and through well - designed active capital account policies ) ( see lee hsien loong ( 2000 ) ). back - up or support for the exchange rate regime what more could be done by emerging markets to enhance the possibility of a successful exchange rate regime? if we accept that one of the central factors presenting pressures on exchange rate regimes in emerging markets is large and volatile capital flows, then the obvious issue is whether measures can be taken to reduce the size and volatility of the flows. the first possibility here is capital controls. mere mention of this possibility creates deep rifts in the debate, with views strongly held and a fair bit of heat generated in the process. the process of transition ( financial deregulation ) is tricky and time - consuming. perhaps the common - sense way to approach this is to accept the possibility that chilean - style controls ( taxes on short - term inflows ) may be useful for some countries during the transition, but not too much should be expected of them ( see the conclusions on chile itself, which suggest that the controls managed to lengthen the maturity of the debt, without being able to prevent the exchange rate from appreciating during the phase of capital inflow ) ( see edwards ( 1998 ) ). 12 it may also be useful to adopt the techniques used successfully by singapore ( and now others ) to limit the ability of domestic banks to lend to foreigners in domestic currency, thus making it much harder for foreign speculators to take large short positions on the currency. other than these specific types of capital control, there are a set of issues which can be put in terms of prudential supervision, rather than capital controls. the sorts of prudential controls which might be used are to limit the opportunities for residents to borrow in foreign currency ( ie to prevent a repeat of the bangkok international