. the depth of the financial system and its integration with international capital markets has a powerful disciplinary effect as it reduces incentives to follow expansionary policies ( at the expense of higher inflation ) as foreign capital would flow out to other markets with more predictable returns. anyway, this time the effects of the financial crisis are more likely to be transmitted through the trade channel rather than the financial channel ( which historically affected the most latin america ). however, in my view, the challenges would be coming more in the form of managing the social tensions that could come as a result of record - high commodity prices ( mainly in terms of higher domestic inflation ). the perspective of slower growth globally driven by the u. s. ( and europe ) is obviously a red light but the impact will be limited. structural and seasonal factors are driving commodity markets. among them, it is worth mentioning supply shocks from climate hazards and geopolitical conflicts. another factor is the increase as from the second half of 2007 in the speculative demand to protect against the depreciation of the dollar and asset losses. looking ahead, weak growth in the u. s. and its eventual contagion to other economies would restrict non - speculative demand for commodities, especially oil and metals. and here it is necessary to distinguish between the effects on hard and soft commodities. agricultural commodities would be less affected mainly because of their lower income elasticity and the relative strong fundamentals of emerging economies ( and not only in china and india ), where demand increased the most. soft commodities accumulate increases ranging from 100 % to 150 % since the beginning of the century with an acceleration in 2007 - 2008, that is leading to historically low stock to consumption ratios ; the lowest in the last three decades. in the cases of soy and corn, demand is consistently outpacing supply due to a hike in food consumption in the emerging world and a growing demand for biofuels in the industrial countries. while supply stays in historically high levels it cannot keep up with the enormous demand. just to give you an example, corn inventories are 30 % below the average of the last ten years. speculative trading on commodities as an asset class will remain strong. the continuity of monetary policies aimed at reducing reference rates could also favor it. in latin america, the challenge is to take the necessary policy measures in order to avoid that this exogenous volatility turns into domestic or endogenous risks. food price rises can potentially lead to wage demands which, given the stickiness of

good times ” ( when the opportunity cost of doing so was low ), so now we have a sizeable stock to weather financial turmoil. in turn, the implementation of a sterilization policy to keep money supply in check enables us to count with domestic liquidity management mechanisms that have been tested and are now very useful for injecting money into the system, if necessary. it is just the same scheme working under different circumstances. this is also reflected in the foreign exchange regime, which has always worked to mitigate excessive volatility, avoiding abrupt fluctuations that could jeopardize the economy's financial stability. after this crisis, financial stability will definitely start to play a role it has never played before in the priority list of central banks worldwide. both developed and emerging countries have had to adjust monetary schemes focused on the interest rate as the single instrument to maintain stability. in fact, financial stability objectives were implicitly and explicitly added, and instruments were adjusted to new priorities. within this framework, many central banks have had to revisit their usual regulation, operation and intervention mechanisms. in this regard, the literature is lagging behind. if the relationship between economic theory and policy recommendations is reasonably well defined during “ normal ” times, in times of turmoil, this relationship becomes much weaker. we have reached a point in which economic theory is having a hard time keeping up with praxis. literature has shown results that are ambiguous or contrary to those produced by the usual “ technology ”, especially in relation to the approach that relies on the interest rate as the single instrument. the same applies to the managed floating exchange rate regimes. recent empirical papers that refined the analysis started by several academics argue against sharp fluctuations in the domestic currency, mitigating excessive volatility, especially in developing countries with rather shallow capital markets and limited access to hedging instruments. in our case, we have been fully consistent with our history, idiosyncrasy and, thus, with the instruments available. we can now claim that our strategy is so sound that it has enabled us to overcome four stress episodes in the past 20 months ( july - october 2007, april - june 2008, september - november 2008 and march 2009 ) and it has proved to be adequate to go through these hard times with unusual stability. despite the current scenario, and for the first time in decades, we are able to ensure monetary and financial stability for the argentine people.