BIS Review 96/1998  - 14 -  While we might be amazed at the extent of the movements in exchange rates (the rupiah falling to less than a fifth of its initial value, which no one at the time thought was significantly overvalued), we should not be surprised by the failure of the portfolio model of exchange rate behaviour (or any other exchange rate model, for that matter).
In essence, financial intermediation tends to raise the level of saving and investment as it reduces the costs associated with bringing lenders and borrowers together. As in the case with price stability, the central bank cannot accept sole responsibility for the development of banks and financial markets, but is well placed to shoulder a major portion of the burden.