This is perhaps the toughest challenge for emerging markets in this regard. In particular, a heavy focus on maintaining immediate financial and economic stability can often hinder efforts to deliver these very same goals in the long run. Thus, ensuring that the outcome of such trade-offs turn out favorable to the attainment of monetary and financial stability in the long term is perhaps the toughest challenge for emerging markets in the present context. Ladies and Gentlemen, To conclude, despite the challenges presented above, the overall direction of change in emerging market countries in the past decade is fundamentally reassuring. Much has been achieved in terms of strengthening the monetary framework and financial system development, reducing vulnerability to external shocks through the establishment of sizable foreign reserves cushion as well as significant restructuring of external debt currency denomination and maturity profile. These changes make it more likely that the process towards further global financial integration will bring substantial benefits in terms of growth and fewer risks, in terms of financial distress, and ultimately contribute towards a more stable macroeconomic outcome. And with that note, let me now end my lecture this evening. Thank you. References Aguiar, M. and G. Gopinath (2007), “Emerging Market Business Cycles: The Cycle Is the Trend”, Journal of Political Economy, Vol. 115, No. 1, pp. 69-102. Arbache, J. (2004), “Do Structural Reforms Always Succeed?” United Nations University Research Paper No. 2004/58. Bank for International Settlements.
The key hypothesis of the research is that the context in which monetary and financial stability is pursued in emerging market economies is different to that of developed economies, and so the challenge and the implications for policy are different. My lecture this evening is organized into two parts. In the first part, I will talk about the unique context of emerging market economies compared to developed economies in the attainment of monetary and financial stability, and discuss the underlying cause of the difference. In the second part, I will highlight the key implications of these differences for the pursuance of monetary and financial stability in emerging market economies, both in the context of shortterm stabilization challenge and the longer-term structural challenge in implementing structural reforms. The lecture will be brief, so that we will have time for a Q and A session afterward. 1. First, the unique context of emerging market economies. As a general statement, one can begin with the notion that the attainment of monetary and financial stability is something that policymakers everywhere place at the forefront of their agendas. And, monetary and financial stability are desirable because they are prerequisites for welfare-enhancing macroeconomic outcomes. Along this line, the context in which monetary and financial stability is pursued in emerging market economies is quite distinct from that in developed economies. For emerging markets, there are two stylized facts that are unique to its policy setting.