This reflects the fundamental reforms these EMEs have put in place over the past 15 years, as well as the hard lessons they learned from past periods of market stress. Among the positives are: •  The absence of the pegged exchange rate regimes that often were undermined violently in the past during periods of stress;  •  Improved debt service ratios and generally moderate external debt levels;  •  Larger foreign exchange reserve liquidity cushions;  •  Clearer and more coherent monetary policy frameworks, supporting what are now generally low to moderate inflation rates;  •  Generally improved fiscal discipline; and  •  Better capitalized banking systems, supported by strengthened regulatory and supervisory frameworks. Of course, progress has not been uniform across EMEs, and more work remains to further strengthen institutional structures in some countries. In particular, vulnerabilities remain in several important EMEs. Still, the fundamental improvements I’ve cited leave many EMEs better positioned than in the past to weather those times in the cycle when the external environment turns from welcoming to wary. The impact that changes in Fed policy can have beyond our borders has led to calls for us to do more to internalize those impacts, or even further, to internationally coordinate policymaking. As I’ve already noted, Fed policies have significant effects internationally, given the central place of U.S. markets in the global financial system and the dollar’s status as the global reserve currency.
William C Dudley: Panel remarks at the International Symposium of the Bank of France Remarks by Mr William C Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the International Symposium of the Bank of France “Central Banking: The Way Forward?” Paris, 7 November 2014. *  *  *  If all goes according to our forecast and the U.S. economy continues to make progress towards the Fed’s dual mandate goals of maximum sustainable employment and 2 percent inflation, the Federal Reserve will likely begin to raise its federal funds rate target off the zero lower bound sometime next year. For the United States, the start of the normalization of U.S. monetary policy will be a very welcome development. It will indicate that the U.S. economy has made great strides in healing itself from the damage caused by the U.S. housing boom and bust, and the financial crisis. However, this shift in policy will undoubtedly be accompanied by some degree of market turbulence. Moreover, it could create significant challenges for those emerging market economies (EMEs) that have been the beneficiaries of large capital inflows in recent years. What can the Federal Reserve do to minimize these risks? These are some of the very important issues raised by Helene Rey’s work. Let me begin by highlighting some of the key points I will be making.