and they also make it possible for investors to obtain higher yields and diversify their risks. notwithstanding these benefits, abrupt capital inflows, in particular capital inflows with short - term horizons, can trigger unintended effects. the key causes of concern are twofold. the first has to do with the possible generation of financial imbalances for families, firms and governments, in the form of excessive and unsustainable borrowing. this phenomenon can be accompanied by bubbles in financial asset prices, in the sense of prolonged deviations in these prices above those values that may be consistent with fundamentals. for example, in the united states, the real estate bubble both stemmed from and fueled the credit bubble, a combination that led to the global financial crisis. assets with prices that can be highly sensitive to capital inflows are, in general, of two kinds. first, greater foreign funding tends to cause local currencies to appreciate, making the exchange rate a possible early indicator of pressures. second, assets preferred by investors such as stocks, bonds and real estate may increase considerably in value. to date, no clear evidence exists of possible widespread financial imbalances in emerging markets. most countries with significant capital inflows have maintained their public and current account balances relative to gdp in surplus or only slightly in deficit, and they also have banking systems with adequate portfolio quality even in cases of rapid loan growth. 5 at the same time, the containment of domestic spending pressures on current accounts is explained, partly, by the accumulation of international reserves by central banks, as well as external financing by some firms, whose proceeds are invested abroad. in contrast, data reveal that the prices of some assets have increased considerably. from 2007 to 2013, most currencies have appreciated in real multilateral terms. some studies suggest that, in some cases, these rates could be above their fair values, when fundamental conditions are taken into consideration. 6 additionally, the stock market indices in most emerging economies have behaved similarly to those in the united states, some of them surpassing their levels prior to the crisis. however, as in the u. s. economy, rising stock prices could be justified by the generation of corporate profits in recent years. in contrast, no general trends of excessive rises in real estate prices have been observed. 7 government bonds have seen considerable appreciation, as the monetary expansion in advanced economies has contributed to downward shifts in and flattening of the yield curves in emerging economies. 8 to the

discussed the benefits and tradeoffs of financial globalization, i would like to talk about the challenges faced by central banks in the current juncture. as we all know, in 2019, the global economic environment was marked by uncertainty. global growth recorded its weakest pace since the gfc. this reflected the effects of protracted trade tensions, high geopolitical risks and idiosyncratic factors in key emerging market economies. in this context, while some recovery is expected in the global economy, growth prospects for 2020 have continued to be revised downward. 2 this weak economic outlook, along with the persistence of inflation below most central bank ’ s targets, has led to more accommodative monetary policy stances in advanced and emerging economies. the easing of global in particular, analysts ’ consensus expect the united states to grow at a slower pace in 2020, reflecting an expected return to a neutral fiscal stance and anticipated fading support from further loosening of financial conditions. meanwhile economic growth is projected to remain subdued in the euro area and in the united kingdom on the back of the decline in economic sentiment indicators, which reflects the ongoing weakness in global trade in an environment of continued global uncertainties. financial conditions registered since last september, the recent decrease in uncertainty coming from lower trade tensions and diminished fears of a hard brexit, has supported investors ’ risk appetite, which has increased capital flows to emerging economies, particularly to fixed income assets. however, towards the end of 2019, financial markets in some latin american countries were briefly affected by social and political tensions that complicated the outlook and increased the challenges for economic policy management. despite the improvement in global financial markets, there have been volatility episodes generated by geopolitical tensions and, more recently, from the outbreak of the coronavirus ( covid - 19 ). this adds to the list of downside risks to global growth and has generated the expectation that monetary policy easing in advanced economies will be maintained, or even increased. challenges for the conduct of monetary policy in this context, i would like to discuss some challenges that central banks face when conducting monetary policy. first, in the case of advanced economies, against a backdrop of high levels of household and government debt with low inflation and already low levels of interest rates, monetary policy space has diminished significantly. in this regard, economic literature is advancing towards the explicit modelling of the pervasive effects of a large stock of debt on aggregate demand ( “ indebted demand theory ” by mian, stra