But given some of the uncertainty that still remains about the impact of Basel II, it is important that we continue to effectively use the safeguards designed in the Basel II process. As I just mentioned, QIS4 was one of a series of studies conducted with banks to test the methodology and identify implementation issues.
However, as shown in the IMF's World Economic Outlook, published earlier this month,5 the anchoring of inflation expectations in emerging economies has improved significantly over the past two decades. It has also been demonstrated that further improvement in the extent of anchoring could strengthen economic resilience to external shocks, by reducing inflation persistence and limiting the pass-through of currency depreciations to domestic prices.