“Does Inflation Targeting Matter?” Ball L., Sheridan N. in: ”The Inflation-Targeting Debate” Bernanke B.S., Woodford M. (2005). 24  See Corbo V., Landerretche O., Schmidt-Hebbel K. “Does Inflation Targeting Make a Difference” in: N. Loayza and R. Soto (red.) “Inflation Targeting: Design, Performance, Challenges” (Central Bank of Chile: Santiago 2002). 25  Gürkaynak R.S., Levin A.T., Marder A.N., Swanson E.T. “Inflation Targeting and the Anchoring of Inflation Expectations in the Western Hemisphere”, forthcoming in Mishkin, Frederic and Klaus Schmidt-Hebbel (red. ), Series on Central Banking, Analysis and Economic Policies X: Monetary Policy under Inflation Targeting (Santiago, Chile: Banco Central de Chile), 2006 and Gürkaynak R.S., Levin A.T. Swanson E.T. “Does Inflation Targeting Anchor Long-Run Inflation Expectations? Evidence from Long-Term Bond Yields in the U.S., U.K., and Sweden”, Federal Reserve Bank of San Francisco Working Paper 2006-09, March 2006. 26  For example a question whether monetary policy should burst asset bubbles was hotly debated during the large European Central Bank conference on 16 to17 March 2006. 27  The examples are the following articles: N. Roubini “Why Central Banks Should Burst Bubbles”, mimeo, Stern School of Business and Roubini Global Economics, January 2006, and A. Posen “Why Central Banks Should Not Burst Bubbles”, Institute for International Economics Working Paper WP 06-1, January 2006. 28  Bernanke B. “Reflections on the Yield Curve and Monetary Policy”, Remarks by Chairman Ben S. Bernanke Before the Economic Club of New York, 20 March 2006. 8  BIS Review 32/2006  respectively so as to prevent possible deflation.
Decisions made by the FOMC in Washington are equally as important for investors in New York as those in London, Tokyo, Rio de Janeiro, Shanghai or even Warsaw. Not only do the FOMC decisions influence US economy, but also — via the financial markets channel — the entire global economy. An unexpected increase in interest rates in the USA may bring about a sudden outflow of capital from the emerging markets, and thus weaken the currencies of those countries and increase their bond yields. Some economists 20 make the point that an important aspect of the growing internationalisation of financial markets is increased discipline, which is extorted by investors on governments and central banks in individual countries. According to this hypothesis, the financial markets, through their continuous valuation of securities, duly reward good and punish bad economic policies. However, the empirical results do not provide hard evidence to support the thesis on fiscal policy discipline. It may be stated, on the other hand, that financial globalisation may have contributed to the discipline of central banks and to “forcing” them to conduct a monetary policy focused on low and stable inflation 21 . At the same time, a significant risk related to the financial markets integration is the possibility to shift economic problems of one country upon other countries, which is greater than before (the contagion effect).