The central role of the dollar and dollar assets rests on several pillars:   confidence in the credibility and coherence of U.S. monetary policy, which preserves the long-run purchasing power of the dollar;    the unimpeachable credit quality of the public debt that anchors our system;    the resilience and vibrancy of our financial system; and    the efficiency and security of our payments system. These are strengths that we must constantly maintain. Ensuring financial stability is essential to advancing the common interests of the global economic system. We have much work still to do in the developed world. But the EMEs also need to be active participants in this conversation, given their rising weight in the world economy, already large contribution to global savings and growing importance in the creation of financial assets. Everyone benefits if the EMEs can liberalize and deepen their financial systems in ways that avoid some of the mistakes that we in the United States and others have made. To sum up, the rapid ascendancy of the EMEs in the world economy and the widespread improvement in living conditions associated with globalization are to be applauded. But aspects of this process have occurred in a manner that has led to strains on both a cyclical and secular basis. The current relationships in terms of capital flows and composition of growth are not likely to prove sustainable on a long-term basis. The issue of global rebalancing has received plenty of attention elsewhere.
For monetary policy in developed countries, this process has been equivalent to a sequence of positive supply shocks that took the form of a spontaneous decline in the import price of manufactured goods. All other things being equal, this terms-oftrade gain has allowed for a lower inflation rate for a given capacity utilisation rate. More fundamentally, and although things seem to be less straightforward in this area, it is possible that the increasing openness of our economies have structurally changed the wage and cost formation process in a manner that favours price stability. It is clear that heightened competition triggered by imports reduces the market power of firms at the national level. But, other more indirect effects are also detectable. According to studies carried out at the Banque de France, to be published in our next Monthly Bulletin 2 , the disinflationary impact of imports appears to be relatively independent of import volumes: the mere existence of potential competition renders the markets, in the words of experts, more “contestable” and influences behavioural patterns. These disinflationary forces are still present. However, there are now other more powerful forces that have the opposite effect. 1  V.Chauvin, D.Irac, N.Maggiar et H.Poncet, « L’information apportée par les anticipations d’inflation sur les salaires et la consommation dans la zone euro » ; J.Coffinet et S.Frappa, « Anticipations d’inflation dans la zone euro : que nous disent les marchés financiers ?