At the same time, in a highly interlinked global economy consensus-building concerning the transmission of spillovers is crucial for dealing with shocks that affect substantial parts of the global economy. Moreover, the IMS should also provide incentives to foster appropriate preventive action that renders economies more resilient to shocks, and provide the necessary standards and infrastructures to make global markets work better as well as make coordination possible when warranted. This is already a robust policy agenda. 6  BIS central bankers’ speeches
It is sufficiently larger than the negative investment demand effect from higher interest rates, such that internal balance is attained and monetary policy is able to pursue domestic inflation and growth objectives.4  1  Linda Goldberg, Paolo Pesenti, Joseph Tracy and Matthew Higgins contributed to these remarks. 2  A global financial cycle refers to the global co-movement of credit by banks and capital markets, asset prices, term premia, and risk premia. 3  Fleming (1962) and Mundell (1963). 4  Krugman (1999). The balance sheet effects imparted from a large international debtor position may work against achievement of an improved external balance and attainment of internal balance. BIS central bankers’ speeches  1  Different policy options are available to a country with a high degree of capital mobility and a preference for currency stability. A country may prefer currency stability as an effective nominal anchor, or because of concerns about the broader uncertainties associated with currency volatility. Regardless of the reason and because the exchange rate is not available to absorb external shocks, this country will be in an unfavorable position to achieve domestic macroeconomic objectives by using monetary policy. Instead, monetary policy is aimed at external adjustment. Tighter foreign monetary policy and financial conditions need to be validated by tighter domestic monetary policy to maintain currency stability. With domestic monetary conditions effectively imported from abroad, they may sometimes conflict with domestic growth and inflation objectives. Simply put, currency stability is prioritized. These policy considerations are summarized in the well-known international policy trilemma.