Once external stability is achieved, cross-country linkages do not give rise to disruptive developments, such as disorderly exchange rate and asset price swings or contractions in real output and employment. External stability crucially depends on the policy behaviour of those issuers and holders of international currencies that are systemically relevant.
7 In my view, such an increase in uncertainty is an important part of what we have observed recently and stems from heightened concerns about the value of financial securities related to certain types of loans, about who is holding these securities, and about how a revaluation of these securities might affect the balance sheets of various financial intermediaries.