Notably, due to the growing interconnectedness between countries, capital flows have been acting as a transmission channel for the worldwide spread of what was originally a national or regional crisis. In this regard, we need a global jurisdiction which can maintain stable global liquidity and monitor cross-border transmission.
This will also help us avoid the same policy missteps that contributed to the environment of increased risk-taking that has severely bruised the stability of financial systems worldwide. It is in this context that I will discuss some important policy issues. First, the crisis underscores the importance of flexibility in the implementation of monetary policy, and inflation targeting in particular.