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Comparative Economic Studies, 2011, 53, (511–534)
r 2011 ACES
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0888-7233/11

www
...
com/ces/

Symposium Article

Extreme Risks in Financial Markets and
Monetary Policies of the Euro-Candidates
HUBERT GABRISCH1 & LUCJAN T ORLOWSKI1,2
1

Halle Institute for Economic Research, Kleine Markerstrasse 8, 06108 Halle (Saale),
¨
Germany
...
Gabrisch@iwh-halle
...
F
...
E-mail: OrlowskiL@sacredheart
...
Our empirical tests show the
prevalence of extreme risks in the conditional volatility series of selected financial
variables, that is, interbank rates, equity market indexes and exchange rates
...
Central banks in these countries will be well-advised to use both
standard and unorthodox (discretionary) tools of monetary policy while steering their
economies out of the financial crisis and through the euro-convergence process
...
doi:10
...
2011
...
This study investigates the proliferation
and scale of these risks as well as their repercussions for the conduct of
monetary policies in the euro-candidate countries
...
This phenomenon is well known in practice and widely

H Gabrisch & LT Orlowski
Extreme Risks in Financial Markets and Monetary Policies

512

researched in the literature
...
Thus financial variables that are close to the mean value in
normal market periods may be widely dispersed at turbulent times, which
results in their ‘fat tails’
...
These variables are vulnerable to
sudden volatility outbursts, and thus may become very unstable (Orlowski,
2010b)
...
In essence, extreme volatility shocks inhibit
monetary policy transmission mechanisms and reduce the efficiency of
standard interest-rate policies (Curdia and Woodford, 2010; Svensson, 2010)
...
To mitigate tail risks, monetary
policies ought to be comprehensive and supplemented with appropriate
macro- and micro-prudential regulatory policies
...

Our empirical investigation is focused on detecting extreme tail risks
(or fat tails) in the distribution of selected financial market variables, namely,
equity market indexes, interbank rates and exchange rates, all of which are
relevant for the conduct of monetary policies in converging economies
...

For comparative purposes Slovakia is also included
...
The selected countries have
been pursuing inflation targeting without a formal disclosure of a specific
instrument rule (Orlowski, 2005, 2008a)
...
In contrast, adjustments of the Hungarian reference rate are associated
mainly with changes in the exchange rate gap
...
In light of these findings, we support the argument of
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Svensson (2003) that a targeting rule is less rigid than an instrument rule
...

Our analysis is focused on three types of market risks that directly affect
monetary policy decisions: equity market risk, interest rate risk and exchange
rate risk
...
For the purpose of
evaluating the degree of leptokurtosis, that is, the prevalence of fat tails in the
conditional volatility patterns, we apply the generalized error distribution
(GED) parameterization
...

The next section reviews the literature on the sources of extreme risks
and their severity during the financial crisis of the period 2007–2009
...
The
empirical results based on the GARCH-M-GED testing are presented and
discussed in the section after that
...
The final section provides a summary
...
There is no common answer to this question
in the literature
...
The ability of the central
banks to stabilize the financial system is also constrained as large budget
deficits are often financed by money creation, which leads to high inflation
and currency depreciation
...
See the examination of the limited capacity of emerging
market countries to engage in fiscal stimulus by Reinhart and Rogoff (2009: chapter 12)
...
The question remains whether
emerging market economies, including the euro-candidates, are equipped
with sufficient monetary policy tools to respond effectively to financial crises
...

Without these liquidity injections the cost of credit would be much higher,
significantly increasing credit spreads and possibly precipitating systemic
risk
...
Consequently, by the end of 2009,
credit spreads decreased to the levels preceding the outbreak of the financial
crisis in August 2007
...
They have engaged
extensively in providing liquidity to banks that had lost trust in each other,
and suspended interbank lending, particularly in the aftermath of the global
credit freeze that followed the collapse of Lehman Brothers Inc
...
In retrospect, the vast and unprecedented liquidity injections
by the Federal Reserve and other central banks helped alleviate a severe
economic recession
...

The answer to this question lies in the distribution of key monetary policy
and other relevant financial variables and in the underlying behavior of agents
in a monetary economy
...
Under such a distribution,
the volatility of these variables is well contained during normal market periods,
but it tends to increase significantly at turbulent times, resulting in extreme
tail risks
...

The roots of extreme tail risks are quite complex
...
It has
been pointed out in the literature that money supply is strongly and positively
related to asset prices (Minsky, 1982a, b; Borio and Drehmann, 2009a, b)
...
As the balance sheet of financial institutions expands,
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515

their willingness to lend, resulting in an endogenous expansion of
the money supply
...
If
asset-price inflation passes through to income inflation, the central bank’s
loss function would signal higher losses, and the bank would increase its
policy rate
...
As credit markets freeze, debt
depreciation, deflation and output decline follow
...
Hence, the underlying
leptokurtic distribution of key monetary and financial variables seems to be
in line with Minsky’s financial fragility hypothesis (Minsky, 1982a, b), and
Kindleberger’s (1988, 2005) history of ‘manias and crashes’, and it is consistent
with the origin and the course of the United States housing market implosion
that initiated the 2007–2009 global financial crisis (Orlowski, 2008b)
...
2 The first challenge is that both functions are based on judgments
about the development of flow aggregates, such as commodity prices, output
and interest rates, assuming that deviations from target or equilibrium are
caused either by the business cycle or by stochastic shocks
...
Indeed, there is evidence that central bank policies become
ineffective during the periods of monetary tightening aimed at abating asset
price inflation
...
Each time, the financial industry evaded
monetary tightening by devising financial innovations and extending credit
...
77)
...
Financial innovations devised to circumvent these
restrictions contributed to the asset price bubble, and subsequently became
toxic (Orlowski, 2008b)
...


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The second problem lies with the central bank’s reaction function
...
An inflation target, supplemented
with output gap and/or exchange rate stability, served as a key policy goal
...
Svensson (2003) questioned the
effectiveness of rigid Taylor rules under asymmetric distribution of the
variables and instead proposed target rules with more discretion
...
For this
reason, non-discretionary policies based unconditionally on Taylor rules are
likely to be inadequate for containing extreme tail risks
...

Adjustments of short-term interest rates constituted a predominant
monetary policy instrument during the ‘Great Moderation’ period
...
As a
result, monetary policies of both highly developed and emerging market
economies can no longer simply focus on a single policy target
...
This may require
monitoring of individual categories of risk such as the market, liquidity,
credit, default, exchange rate, counter-party and other risks faced by the
financial sector and the real economy as increases in these risks may
translate into higher systemic risk
...
This does not mean a loss of independence stemming from
government interference, but rather a loss of power due to liberalization and
deregulation of financial markets
...
A theoretical explanation of this phenomenon can be found in
Wolfson (2002), who states that the debt-deflation character of a crisis
turns into a debt-devaluation interaction through which the volatility of key
monetary and financial variables becomes strongly affected by international
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events
...
As a result, the local central bank
de facto and gradually loses economic independence, because the increasing
inflows of foreign capital are difficult to sterilize
...
However, in the case of financial crisis accompanied
by local currency depreciation, holders of debt denominated in foreign
currency may face a greater default risk
...

An erosion of central bank independence has affected the euro-candidate
countries, all with non-reserve currencies, particularly in the aftermath of a
far-reaching liberalization of capital flows and financial sector deregulation as
necessitated by their active preparations to satisfy the Maastricht convergence
criteria (Gabrisch, 2009)
...
,
2009)
...
In
addition, widening interest rate spreads have contributed to the appreciation
of local currencies, the steady course of which has diminished the exchange
rate risk
...
A strong evidence of extreme tail risks in
these countries would call for a more discretionary approach to monetary
policy, disconnected from the steady course implied by a Taylor rule
...
Although the volatility of equity
market risk does not customarily enter into the central bank’s loss function or
instrument rules, it has far-reaching reverberations for the credit markets,
capital flows, financial and tangible investments, and exchange rate movements, all of which affect the conduct and direction of monetary policy
...
In
essence, the volatility dynamics of equity markets are a good indication of
investors’ confidence in the country’s financial stability and resiliency against
external financial contagion
...

Monitoring interest rate risk is equally crucial for monetary policy decision
making, because its proliferation reduces the effectiveness of monetary policy
instrumentalization
...
Such an approach lets them
`
set a time path for the interest rate risk premium vis-a-vis the eurozone,
which is important for the successful implementation of monetary policy
during the course of convergence to the euro
...
This risk is tied to the
instability of a possible exchange rate target and to the unreliability of the
exchange rate channel of monetary policy transmission
...
Elevated exchange rate risk at stressful
market periods confuses asset valuation and credit pricing in the banking
sector
...

Monetary authorities must react to jumps in exchange rate volatility as they
distort the functioning of the exchange rate channel of policy transmission,
which has been proven to be unstable in the euro-candidate countries
ˇ
(Golinelli and Rovelli, 2005; Orlowski, 2005, 2008a; Kocenda and Valachy,
ˇ
2006; Kocenda et al
...
We therefore estimate conditional volatility of
exchange rate changes in response to key determinants of exchange rates,
that is, the uncovered interest parity and the purchasing power parity, in our
selected countries
...
In order to capture risk dynamics, we examine
changes in the conditional volatility of major equity market indexes, relative
short-term interest rates and daily changes in the euro value of local currencies
...
In order to investigate
the conditional volatility dynamics we employ GARCH(p, q)-M-GED, the
generalized autoregressive conditional heteroscedasticity with the in-mean
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519

variance and generalized error distribution, testing
...
We further
examine the degree of leptokurtosis, which is measured by the extent to which
the GED parameter is less than 2, and the relative proportion of shocks or ‘news’
to volatility reflected by the ARCH(p) coefficients to the persistency in volatility
implied by the GARCH(1) coefficient
...

Equity market risk
In our conditional mean equation for the return process rt, changes in the log
of local equity market indexes Et|rt serve as a dependent variable
...


Interest rate risk
Changes in the domestic short-term interest rate, the 3-month interbank
lending rate, it3M, are modeled in relation to changes in the 3-month Euribor
it3M and in the log exchange rate st
...

The conditional mean specification with the in-mean log GARCH variance is
À
Á
3M
Ditjrt ¼ b0 þ b1 Dit3M þ b2 D logðst Þ þ b3 log s2 þ et
tÀ1

ð3Þ

The corresponding GARCH(p, 1) conditional variance specification is
s2 ¼ h0 þ h1 e2 þ h2 e2 þ Á Á Á þ hp e2 þ g1 s2
t
tÀ1
tÀ2
tÀp
tÀ1

ð4Þ

High-order ARCH terms are applied in this case as they proved to be
significant in preliminary testing
...
The model also includes changes in the local
equity market index Et as a regressor in the conditional mean equation in
order to reflect the impact of equity capital flows on exchange rates
...
In all cases, the selection of p and q orders is
obtained by minimizing the Akaike and the Schwartz information criteria
...
Changes in the German stock market index drive the
euro-candidates indexes in the same direction, but at a varied degree of
significance
...
This variable has proven to be insignificant in all
examined cases, suggesting that the EU accession has not decisively contributed to the financial
stability of the euro-candidates
...
GARCH-M-GED estimation – equations 1 and 2
...
633*
À1
...
306*
1
...
084**
À1
...
001***
ARCH(1)
0
...
868***
GED parameter
1
...


7,432
...
936
À5
...
86

0
...
052***
0
...
356***
6,905
...
514
À5
...
93

Hungary

Romania

1
...
998***
0
...
001***
0
...
887***
1
...
0
À5
...
665
1
...
263**
8
...
065**

0
...
541***
0
...
001***
0
...
655***
1
...
001***
0
...
654***
0
...
3
À5
...
650
1
...
1
À6
...
843
1
...

Notes: All variables are in first differences; t-statistics are in parentheses; AIC ¼ Akaike information
criterion, SIC ¼ Schwartz information criterion; stock market indexes are Prague PX50, Warsaw WIG20,
Budapest BUX, Bucharest BET(L), Bratislava SXSAX16
...
There is a negative risk premium on the Czech and
Polish equity markets, as implied by the negative sign of log(GARCH) terms in
the conditional mean equation
...
The risk premia results for Hungary and
Slovakia are inconclusive
...
The
ARCH-type shocks to volatility in these three markets play a relatively minor
role
...
Arguably, the Romanian market is the most susceptible
to unexpected shocks to volatility among the analyzed group of equity
markets
...
Evidently, volatility in these markets tends to escalate
considerably during turbulent market periods, while it remains subdued at
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Extreme Risks in Financial Markets and Monetary Policies

522

tranquil times
...
It is very close to unity in the cases of the Czech,
Polish, Hungarian and Romanian markets, which suggests no visible gains in
volatility convergence
...

The time-path of conditional volatilities for the Czech, Polish, Hungarian,
Slovak and Romanian stock market indexes is shown in Figures 1(a)–(e)
...
The largest volatility upswings in the GARCH series took place during
the peak of the crisis in the October 10 – November 15, 2008 period
...
The October 10 market plunge was followed by series
of up-and-down swings of the euro-candidates’ equity markets, with the
elevated volatility not receding to its pre-crisis pattern until July–August of
2009
...
The GARCH residuals seem to recede
gradually during the pre-accession periods in all five markets, but there is
no discernible containment of volatility since the respective EU accessions
...
Moreover, euro adoption did not
contain stock market volatility in Slovakia
...
The volatility patterns in Slovakia should be of concern
for monetary authorities in the euro-candidates because euro adoption does
not automatically bring about gains in financial stability
...
4 The likelihood of disruptive spillover effects of elevated
equity market risk into domestic credit, investment and economic growth at
times of financial distress remains very high
...
From the
perspective of our study’s objectives, the most striking outcome is the extreme
4

ˇ
Similar conclusions can be found in Hanousek et al
...

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Extreme Risks in Financial Markets and Monetary Policies

523

`
Figure 1: GARCH conditional standard deviation for equity market index series vis-a-vis German DAX40
(a) The Czech Republic: Prague SE PX Index; (b) Poland: Warsaw WIG20 Index; (c) Hungary: Budapest BUX
Index; (d) Romania: Bucharest BET(L) Index; (e) Slovakia: Bratislava SXSAX16 Index
Source: Own estimations based on Datastream data

leptokurtosis of the interbank rates volatility series in all five cases, which is
more pronounced than is the leptokurtosis of the equity market series
...
This finding
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524
`
Table 2: Changes in 3-month market interest rates vis-a-vis the changes in Euribor 3-month rates and the
log of the exchange rate against the euro
...
Daily series;
sample period January 3, 2000 – August 7, 2009
Variables +

Czech Republic

Hungary

Romania

Slovakia

Conditional mean equation (coefficient  100)
Constant term
À0
...
000***
EURIBOR3M
0
...
000
Log(Exchange rate)
0
...
000
Log(GARCH)
À0
...
000***

0
...
000***
À0
...
000***

À38
...
000***
0
...
468***

À28
...
000
0
...
972***

Conditional variance equation
Constant
0
...
537***
ARCH(2)
À0
...
520
GED parameter
0
...
006***
2
...
309**
F
0
...
234***

0
...
780***
À0
...
179***
0
...
155***

0
...
006***
À0
...
412***
0
...
000***
0
...
008***
0
...
652***
0
...


4,301
...
430
À3
...
314

7,779
...
208
À6
...
852

5,502
...
390
À4
...
107

5,832
...
962
À4
...
670

10,634
...
490
À8
...
020

Poland

***denotes significance at 1%, **at 5% and *at 10%
...

Source: Authors’ own estimation based on Datastream data

supports the claim that short-term interest rates of the euro-candidates are likely
to jump significantly in times of financial distress, underscoring exceptional
vulnerability of their banking sectors to external shocks
...
These reactions are likely related to the very high initial interest rate
risk premia in these two countries as well as to changes in interbank borrowing
from local rather than eurozone banks
...
The conditional volatility series of interbank rates is highly
persistent for Polish and Hungarian interbank markets, as signified by high
values of GARCH coefficients
...

The graphical displays (Figures 2(a)–(e)) of the GARCH conditional
standard deviation series show large jumps in interest rate volatility for the
Czech Republic, Hungary and Romania coinciding with the October 10, 2008
turbulence in global financial markets
...

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Figure 2: GARCH(p, q)-M-GED conditional standard deviations of daily changes in local 3M interbank
rates in relation to changes in 3M Euribor and the exchange rate, equations 3 and 4
...
(a) Czech interbank rates, GARCH(2, 1)-M-GED; (b) Poland’s interbank rates
GARCH(2, 1)-M-GED; (c) Hungary’s interbank rates GARCH(3, 1)-M-GED; (d) Romania’s interbank rates
GARCH(2, 1)-M-GED; (e) Slovakia’s interbank rates GARCH(3, 1)-M-GED
Source: Authors’ own estimation based on Datastream data

In all, relative interest rate volatility in the euro-candidate countries remains
very high
...
These high interest rate risk premia make the financial systems
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526

of the euro-candidates susceptible to large interest rate shocks and contagion
effects from global crises
...

Exchange rate risks
The exchange rate volatility model is multivariate and thus more elaborate
than the equity market and the interbank rate models, due to the overall
statistical significance of the regressors included in the conditional mean
equation
...

The results reveal that changes in euro values expressed in local currencies
are highly sensitive to changes in local stock market indexes for all examined
countries, with the notable exception of Slovakia, as implied by the negative

`
Table 3: Changes in (the log) exchange rates vis-a-vis the euro as a function of changes in: the
term spread on sovereign bond yields, the 3M interest rate differential and the stock market index
...
Daily series; sample period January 3, 2000 – August 7,
2009 (April 1, 2005 – August 7, 2009 for Romania; January 3, 2003 – December 31, 2008 for Slovakia)
Variables +

Czech Republic

Poland

Hungary

Romania

Slovakia

Conditional mean equation (coefficient  100)
Constant term
À0
...
317**
Interest rate differential
0
...
483***
Log(GARCH)
À0
...
346*
1
...
218***
À5
...
034*

À0
...
990***
2
...
592***
0
...
191*
À0
...
290***
À4
...
018*

À0
...
044
0
...
031
À0
...
000**
0
...
177***
F
0
...
050***

0
...
154***
À0
...
941***
1
...
000***
0
...
078
À0
...
891***
0
...
000**
0
...
263***
F
0
...
939***

0
...
167***
F
F
0
...
842***

Diagnostic statistics
Log likelihood
AIC
SIC
Durbin–Watson stat
...
985
À8
...
461
2
...
908
À7
...
513
2
...
733
À8
...
162
2
...
746
À8
...
216
1
...
790
À9
...
165
1
...

Notes: All variables are in first differences; AIC ¼ Akaike information criterion, SIC ¼ Schwartz
`
information criterion; a minus 1-day lag is applied to the Czech 3M Pribor vis-a-vis 3M Euribor; term
spread reflects 10Y less 3M sovereign bond yields; short-term interest rates are: 3M Pribor, 3M Wibor,
3M Bubor, RMIBK3M, 3M Skibor, 3M Euribor; stock market indexes are Prague PX50, Warsaw WIG20,
Budapest BUX, Bucharest BET(L), Bratislava SXSAX16
...
This suggests that capital inflows
to domestic equity markets correspond to the local currency appreciation (euro
depreciation), which underpins a strong role of foreign capital inflows in local
market movements
...
In the first four cases, the wider term spread translates into currency
depreciation, thus satisfying the purchasing power parity conditions, as it likely
reflects rising long-term inflation expectations
...

Romania is again a notable exception
...
5
The conditional volatility of the analyzed series is highly persistent in all
five euro-candidates, as implied by GARCH(1) coefficients all being close to
unity
...
Certainly, the most crucial finding
of the tests is the very high degree of leptokurtosis in the exchange rate series
in all five cases, as implied by the estimated GED parameters significantly
lower than 2
...

Further insights in the time-varying path of exchange rate volatility are
provided by GARCH standard deviations shown in Figures 3(a)–(e)
...
It is worth
noting that there have been several pronounced volatility jumps in SKK series
during this period
...

5
ˇ
See Kocenda and Poghosyan (2009) for a more detailed examination of the macroeconomic
determinants of the exchange rate risk in the new EU Member States
...


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Figure 3: GARCH conditional standard deviations generated from estimations of equations 5 and 6
reported in Table 3
...
(a) The Czech Republic:
GARCH(2, 1)-M-GED; (b) Poland: GARCH(2, 1)-M-GED; (c) Hungary: GARCH(3, 1)-M-GED; (d) Romania
(April 1, 2005 – August 7, 2009 daily series): GARCH(2, 1)-M-GED; (e) Slovakia (January 3,
2003 – December 31, 2008 series): GARCH(1, 1)-M-GED
Source: Authors’ own estimation based on Datastream and Eurostat data

In essence, the 2007–2009 global financial crisis has hampered the
process of gaining exchange rate stability in the analyzed countries, with
the notable exception of Slovakia, whose euro adoption cushioned the
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transmission of global financial shocks
...


MONETARY POLICY IMPLICATIONS FOR THE EURO-CANDIDATE
COUNTRIES
Our empirical findings shed new light on the recent monetary policy debate,
which White (2009) summarizes as the ‘lean versus clean’ policy dilemma
...
This approach was well suited for the ‘happy’ period
of the Great Moderation epitomized by small business cycle fluctuations and
low financial risks
...
Among others, Borio and White (2003) and Svensson
(2010) differentiate between the tasks of monetary policy and the tasks of
financial stability policy all within a new framework of macro-financial stability
...

With respect to the euro-candidate countries, our empirical analysis
implies that outbreaks of financial crisis episodes can be signaled, even in
seemingly tranquil times, based on the monitoring of tail risks embedded in
the behavior of key monetary policy target and instrument variables
...
In order to fulfill this task, monetary policies ought to
become more unorthodox and seemingly more complex than those based on
simple Taylor rules
...
They should become
decisively expansionary at times of financial distress in order to increase the
supply of loanable funds and sustain bank lending
...
In fact, recent
monetary policies of the central banks following such models have turned
out to be pro-cyclical and seemingly ineffective for abating asset-price
bubbles (Hellwig, 2008; Jobst, 2009)
...
Thus, they contributed to
increasing private debt and rising asset prices
...

On the basis of the above arguments, we advocate a new financial
stability framework for the euro-candidate countries that includes three basic
synchronized components: monetary policy, (macro- and micro-) prudential
stability policy and international collaboration
...

In order to respond effectively to possible outbreaks of extreme risks,
monetary policy ought to be counter-cyclical and also relatively flexible
...
As suggested by the empirical findings, the
episodes of extreme risks, particularly those prevalent in the interbank credit
markets, have seriously distorted forecasts of key monetary policy variables
...
Our study underscores the need to detect leptokurtosis in the
forecasting models
...
If the estimated GED parameter
is less than 2, leptokurtic distribution is detected
...
In essence,
effective risk-mitigating policies cannot be based only on interest rate
adjustments
...
Not only monetary policies, but also prudential regulatory
policies should be counter-cyclical and lean against the bubbles whose
potential implosion could impair financial system stability, as implied by
the ‘Geneva Report’ (Brunnermeier et al
...
In the case of euro-candidate
countries, such policies should include regulation aimed at controlling
excessive leverage of banks, particularly foreign banks, that engenders
pro-cyclical effects
...
We argue that high leptokurtosis, that is, extreme
tail risks associated with abrupt price adjustments stem from asset-price
volatility
...
Substantial credit booms spurred
by foreign banks in these countries can threaten the macroeconomic and
financial stability of the region
...

The third component is international collaboration
...

Owing to the international transmission of shocks, international coordination
of these policies is crucial, particularly for the euro-candidate countries as
a group pursuing the joint task of adopting the euro
...
International collaboration should not be limited to emergency
situations only, such as the efforts of the Vienna Initiative launched in
January 2009 in response to the recent crisis
...
Macro- and micro-prudential regulation and agreements should be
mutually coordinated in order to avert possible loopholes and asymmetric
effects
...
This is due to pro-cyclical effects of simultaneous
actions of banks, households, private companies and the government in both
crisis and pre-crisis periods
...
Central banks in
these countries, as independent institutions, are certainly qualified to steer
the smooth euro-convergence process effectively, but they need to account for
possible outbreaks of extreme risks in financial markets
...
We also include Slovakia,
already a euro-member, for comparative purposes
...
These risks exist in every monetary economy
...

Our empirical investigation of the equity market, interest rate and
exchange rate risks reaffirms prevalence of significant tail risks in the
examined countries, as implied by the leptokurtic data distribution in the
conditional volatility series
...
Our tests also show that external contagion effects of
the 2007–2009 global financial crisis were very strong, triggering excessive
volatility in all financial markets of the euro-candidate countries
...

Monetary policies can help mitigate extreme tail risks in financial
markets of the euro-candidates
...
Monetary
policies following this concept should be reasonably restrictive and aim at
preventing an excessive buildup of debt in the economy
...
Such
flexible policy responses are possible when monetary policy conduct departs
from rigid instrument rules and resorts to discretionary prevention of financial
market distress
...
Moreover, monetary and regulatory policies ought to be
mutually coordinated in order to eliminate asymmetric responses within a
cohesive bloc of countries
...

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