time lows. there is evidence that the effect on other asset prices, on average, has also been considerable. 3 an important vehicle for the financial boom in emerging - market economies was a surge in capital inflows by nonresidents, observed since 2010. although annual flows were not unprecedented, this time their persistence, and more importantly, their composition, characterized by a higher proportion of portfolio funds, were distinctive features. although there is no agreement on the relative importance of the determinants of the capital flows, it is generally accepted that they include the prolonged monetary easing of advanced countries, a reduction of global risk aversion, which may not be independent from the previous factor, and the idiosyncratic characteristics of recipient countries, such as prospects for economic growth and financial stability, as well as the depth and flexibility of their financial markets. 4 the available information suggests that, as a general rule, capital inflows did not result in widespread financial imbalances in emerging economies. for example, most of them maintained relatively stable ratios to gdp in their current accounts, public - sector debt, total external debt, and domestic credit to the private sector. nevertheless, there seem to be for a review of the effectiveness of qe, see martin, c. and c. milas ( 2013 ), “ quantitative easing : a sceptical survey ”, oxford review of economic policy, 28 ( 4 ). for an exposition of these and other risks and costs, see, for example, carney, m. ( 2010 ), “ living with low for long ”, speech to the economic club of canada, toronto, ontario, december ; and caruana, j. ( 2012 ), “ international monetary policy interactions : challenges and prospects ”, speech given at the conference “ cemla - seacen, punta del este ”, uruguay, november. for an estimation of the international impacts of qe, see chen, et al. ( 2012 ), “ international spillovers of central bank balance sheet policies ”, bis paper no. 66, october. two empirical analyses of the factors that explain capital flows are ghosh, a. r., et al. ( 2012 ), “ surges ”, imf working paper, wp / 12 / 22, january ; and fratzscher, m. ( 2011 ), “ capital flows, push versus pull factors and the global financial crisis ”, ecb working paper series, no. 136

delving deeper into the benefits that nafta has produced, let me highlight some of these reforms that mexico has implemented through the years. 2. mexico as a trusted partner mexico has developed a solid macroeconomic framework over the years through a prolonged effort of reform that has been key to cope with the many challenges that the international environment has posed. these measures have contributed to the macroeconomic stability that mexico has enjoyed during the last years. in terms of the monetary policy framework, since 1994 banco de mexico has been autonomous and, by law, it is mandated to keep a low and stable inflation. in 2001 we adopted an inflation targeting scheme to conduct our monetary policy. indeed, a credible commitment by the central bank to attain its inflation target, along with an absence of fiscal dominance, has brought about a significant reduction of the level, volatility and persistence of inflation ; the anchoring of inflation expectations, and a lower exchange - rate pass through onto prices. this has helped to keep inflation and its expectations well - behaved, despite the large and persistent depreciation that the peso has registered in the past couple of years. even though there has recently been a noticeable increase in inflation as a result of the cumulative effect of the depreciation of the peso and the liberalization of gasoline prices, banco de mexico has taken the appropriate steps to keep inflation expectations wellanchored and to induce a gradual convergence back to our permanent inflation target. the fully flexible exchange rate regime that mexico has followed since the 90s has been a key element of our macroeconomic policy framework, given that the exchange rate has worked as an efficient shock absorber for the mexican economy. as a result, the room to maneuver and the flexibility of monetary policy to counteract macroeconomic shocks has also increased. moreover, mexico has also strengthened the regulation and supervision of the domestic financial system. in particular, all our financial institutions already comply with basel iii guidelines. there have also been relevant changes in fiscal policy. in particular, during the last decade mexico has improved its public finances along two fronts : first, by strengthening the fiscal responsibility law, and second, fiscal reforms that have allowed the federal government to increase its revenue from tax sources, reducing the dependency on oil revenues. the important progress in the country´s fiscal framework has allowed for a better implementation of macroeconomic policy and has reduced the risks associated with volatile and uncertain sources of revenue. while macroeconomic stability is a necessary condition for accelerated and sustainable growth, it is not sufficient