, ben bernanke ’ s blog, march and april. bis central bankers ’ speeches graph 1 advanced economies : central banks ’ holdings of government bonds % of outstanding market size, march 20161 belgium italy france austria ireland spain finland portugal netherlands germany japan united states united kingdom except for japan, which shows data as of the end of 2015. source : own calculations based on the ecb, bank of japan, bank of england, federal reserve, sifma, japanese ministry of finance, u. k. debt management office, and bloomberg. graph 2 advanced economies : two - year government bond interest rate distributions1 proportion of total 1. 2 may 10, 2016 december 28, 2007 0. 9 0. 6 0. 3 0. 0 - 2 - 1 includes australia, austria, belgium, canada, france, germany, japan, the netherlands, singapore, sweden, switzerland, the united kingdom and the united states. source : own calculations based on bloomberg. bis central bankers ’ speeches graph 3 advanced economies : government debt with negative interest rates1 trillions of dollars others japan germany france apr - 16 mar - 16 feb - 16 jan - 16 dec - 15 nov - 15 oct - 15 sep - 15 aug - 15 jul - 15 jun - 15 may - 15 apr - 15 mar - 15 feb - 15 jan - 15 dec - 14 nov - 14 oct - 14 sep - 14 aug - 14 jul - 14 includes sweden, denmark, austria, belgium, czech republic, finland, ireland, italy, netherlands and spain. source : own calculations based on the market value of the jpmorgan gbi broad index. graph 4 emerging economies : nr holdings of local - currency government securities % of total outstanding1 jan - 16 sep - 15 may - 15 jan - 15 sep - 14 may - 14 jan - 14 sep - 13 may - 13 jan - 13 sep - 12 may - 12 jan - 12 sep - 11 may - 11 jan - 11 sep - 10 may - 10 jan - 10 unweighted average of ratios for brazil, colombia, hungary, indonesia, israel, malaysia, peru, poland, russia, south africa, south korea, thailand and turkey. total outstanding includes bonos m, cetes, bondes d, udibonos and bpa. source : own calculations based on finance ministries, central banks and other national authorities. bis central bankers ’ speeches graph 5 emerging economies : local currency value in u. s. dollar terms1 january 2007 = 100 may -

##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