Third High-Level Seminar of the Eurosystem and Latin American Central Banks held in Madrid on 4 December 2006

The monetary and financial challenges for central banks associated with the ongoing process of globalisation were the main focus of the discussions held in the Third High-Level Seminar of the Eurosystem and Latin American Central Banks that took place today in Madrid.

The Seminar was attended by Governors and high-level representatives of Latin American and Eurosystem central banks, as well as by the Center for Latin American Monetary Studies (CEMLA) and the European Commission.

Participants discussed the extent to which global economic developments in recent years have cast a number of financial and monetary relationships (between and within advanced and emerging economies) in a different light and reviewed the experience in both regions.

The Seminar was hosted by Banco de España and jointly organised together with the European Central Bank. Its aim was to consolidate the policy dialogue between central bankers from Europe and Latin America, following the Seminar in Rio de Janeiro in 2004.

The first session discussed the impact of globalisation on both inflation and monetary policy frameworks. There was a discussion on a number of macro- and microeconomic factors which may be attributed to globalisation – such as higher policy discipline, stronger international competition, financial interdependence, and the growing integration of emerging market economies into global markets – and have been behind the reduction in inflation in recent years. At the same time, the extent to which these structural changes have also had an impact on the effectiveness of monetary policy and the relative importance of the different monetary transmission channels were also addressed.

The second session focused on the changing financial environment in Latin American economies and the extent to which resilience has increased against the backdrop of continued imbalances in global current account configurations. The extent to which the changing financial environment in Latin America entails new challenges for monetary (and supervisory) authorities, as well as new opportunities for public and private borrowers, was also discussed.

The third session explored the drivers and limits of the process of foreign exchange reserve accumulation that has taken place – in varying degrees – among central banks in emerging economies in recent years. The extent to which large-scale increase in international reserve holdings has been relevant in the building up of global imbalances, including through its impact on global capital flows , was discussed.

Governors thanked the Banco de España for the outstanding organisation of today´s Seminar in Madrid and underscored the value of this unique form of policy dialogue between Latin America and Europe, which they will continue in the future.