Mario Draghi speech: The International Dimension of Monetary Policy
Introductory speech by Mario Draghi, President of the ECB, at the ECB Forum on Central Banking,
Sintra, 28 June 2016
In recent years central banks across advanced economies have been engaged in the same task, namely raising inflation and inflation expectations back to levels consistent with price stability. Each has faced conditions particular to its own jurisdiction. Each has deployed measures appropriate to its own context. And each has acted to fulfil the mandate laid down in its own constitution.
And yet, the fact that all central banks have faced a common challenge of low inflation is not coincidental. There are global factors at play. And this begs the question, what is the best way for us to deal with them?
At one extreme, central banks can take global conditions as entirely exogenous and set their policies accordingly. At the other extreme is explicit coordination of monetary policies. In between is a range of informal solutions.
Whatever one’s views on these options, what is clear is that the question of the international dimension of monetary policy is becoming more pertinent, since the common factors affecting central banks are increasing.
The global drivers of inflation
Indeed, a growing literature suggests that globalisation has created a common factor in inflation developments, which goes beyond fluctuations in energy or commodity prices. Higher import volumes have increased the importance of international prices and wages relative to domestic ones, making the global output gap more relevant.
In that context there are two types of factors that are significant for the global low inflation environment we face today: more cyclical factors that have put downward pressure on prices; and more structural factors that have lowered the equilibrium real rate and slowed down the response of the economy to monetary policy.
The first type of factors includes the large negative output gaps generated by the financial crisis and its aftermath, which still average 1% among G7 economies today. This global slack has dampened in particular import and producer price inflation, both of which have been weak for several years among advanced economies. Prices set by producers in the euro area and those set by producers in trading partner countries are indeed highly correlated.
Also depressing global inflation has been the slump in demand for energy and commodities linked to the slowdown in emerging markets. This has fed not just into lower headline inflation, but also into lower underlying inflation through its effect on costs and imported prices. Indeed, if one decomposes inflation for the average advanced economy, one finds that since mid-2014 there has been a notable rise in the global component, linked largely to oil and commodity price falls.
These various factors may originate only in parts of the global economy – some originate more in advanced economies, other more in emerging markets – but in an integrated world they have global effects. Cyclical weakness has spilled over through various channels into a similar challenge for all.
The second type of factors is more structural in nature. They concern the global forces that have led to very low real equilibrium interest rates across advanced economies, and hence made it more complicated for monetary policy everywhere to provide the appropriate boost to global demand given an effective lower bound on nominal interest rates. In particular, this has led many central banks in the advanced economies to engage in large-scale unconventional policies.
That low interest rate environment is a consequence of a global excess of desired saving over planned investment, which results from rising net savings as populations plan for retirement; from increased demand for and lower supply of safe assets; from relatively less public capital expenditure in a context of slowing population growth in advanced economies; from the secular shift from industries intensive in physical capital to those more intensive in human capital; and from a slowdown in productivity growth that reduces returns on investment.
Again, those factors may not be distributed homogenously across economies, but their effects are global because they propagate through global financial markets. With internationally mobile capital, the clearing interest rate that balances saving and investment is more a global concept than a local one. And accordingly, estimates of the equilibrium interest rate suggest that it is very low, possibly even negative, in the euro area, the US and other advanced economies.
None of this means that central banks should give up on pursuing their domestic price stability mandates. We have demonstrated with our unconventional tools that it is possible to engineer accommodative financial conditions even when the equilibrium interest rate is low. And we have shown that this can be effective in supporting domestic demand and stoking domestic price pressures even when disinflationary headwinds are blowing from the global economy.
But the global nature of low inflation does have two important implications.
Coping with monetary policy spillovers
The first is that operating against persistent headwinds arising from abroad has forced central banks to deploy monetary policy with more intensity to deliver their mandates, and that in turn results in higher financial stability risks and spillovers to economic and financial conditions in other jurisdictions.
Such spillovers are not necessarily all negative for the global economy. On the contrary, by securing economic and financial stability in their own jurisdictions, advanced economies also help stabilise other economies through trade and financial linkages.
The empirical evidence suggests that the net spillover effect of the measures taken during the crisis has been positive, especially at times – such as after the Lehman crash – when countries have faced common global shocks.
At the same time, monetary policy has inevitably created destabilising spillovers as well, especially when business cycles have been less aligned. The large exchange rates fluctuations between major currencies, and the pressures some emerging economies have experienced from capital flows, are testament to that. This is not so much a result of the measures central banks have employed, but rather of the intensity with which they have had to be used.
These negative spillovers have led to a revival of interest in the topic of monetary policy coordination. But formal monetary policy coordination is complex, for well-known reasons.
Central banks have national mandates, not global ones, and are accountable to their domestic parliament. This does not mean, however, that we cannot achieve a better global solution than we have today.
We have seen, for instance, how divergent monetary policies among major central banks can create uncertainty about future policy intentions, which in turn leads to higher exchange rate volatility and risk premia. That then has to be countered with more expansionary monetary policy, increasing spillover effects for others. We also know that competitive devaluations are lose-lose for the global economy, since they lead only to greater market volatility, to which other central banks are then forced to react to defend their domestic mandates.
So we would all clearly benefit from enhanced understanding among central banks on the relative paths of monetary policy. That comes down, above all, to improving communication over our reaction functions and policy frameworks.
The global economy could also benefit from cooperation among spillover-initiating and spillover-receiving economies on how to mitigate unwanted side effects.
One aspect that we need to understand better is how domestic monetary regimes affect the transmission of foreign monetary policy shocks. There has been a debate in recent years as to whether the famous “trilemma” of international macro has collapsed into a “dilemma”, whereby floating exchange rates no longer guarantee autonomy for domestic monetary policy, and policy independence is only possible if capital flows are in fact managed.
But there is also evidence that exchange rate regimes still matter. Various recent studies support the traditional view that exchange rate flexibility affords at least some degree of insulation from global shocks.
Another aspect is understanding the role of domestic policies more broadly in mitigating negative spillovers. A large body of empirical work in recent years has shown that fiscal, macro-prudential, regulatory and supervisory policies can help mitigate the adverse effects of foreign monetary policy on domestic financial stability. Indeed, the experience with the taper tantrum in 2013 showed how differences in domestic policy frameworks shaped how severely different economies were affected by financial spillovers.
In other words, it has become clearer since the crisis that the famous “Tinbergen principle” which we apply at the domestic level also needs to be applied at the global level. Policymakers need to have sufficient instruments to deliver on their objectives. And when they do have them, they must use them.
The need for policy alignment
The second implication of the global nature of low inflation is that there is a common responsibility for addressing its sources, whatever and wherever their origin.
Indeed, to the extent that the environment in which we operate is more affected by the global output gap, and the global savings-investment balance, the speed with which monetary policy can achieve domestic goals inevitably becomes more dependent on others – on the success of authorities in other jurisdictions to also close their domestic output gaps; and on our collective ability to tackle the secular drivers of global saving and investment imbalances.
In a recent speech in Brussels I made a similar point regarding the interaction between monetary policy and other policies at the domestic level, such as fiscal and structural policies. I maintained that central bank independence could best be described as independence in interdependence, since monetary policy can always achieve its objective eventually, but it will do so faster, and with less collateral effects, if the overall policy mix is consistent.
What I am saying here is that the same applies at the global level. We may not need formal coordination of policies. But we can benefit from alignment of policies. What I mean by alignment is a shared diagnosis of the root causes of the challenges that affect us all; and a shared commitment to found our domestic policies on that diagnosis.
Today, for instance, the way in which domestic policies respond to a shortage of demand globally will vary: in some cases, the emphasis may be on increasing public investment; in others, on supporting private demand through more growth-friendly tax and regulatory policy, and of course through monetary policy. The relative stance of stabilisation policies will differ across countries depending on cyclical positions. But the sign of the effect on global demand needs to be positive.
Similarly, structural policies that aim at raising participation and productivity may take different forms in different places, but they need to achieve the same outcome, which is to increase long-term growth rates and raise equilibrium interest rates.
Here fora such as the G-20 can play an essential role in bringing about the appropriate alignment of policies. It is key that what is agreed in those fora is translated in the concrete policy actions.
The disappointing outcome of the G-20 commitment to raise global growth by 2% with structural measures is one example of how intentions and actions can diverge. It contrasts with the more successful example that was provided by coordinated global fiscal expansion in 2008-09. Such fora of course cannot bind countries into specific actions. But mutual recognition of their common interest can act as a form of coordination device.
That common interest today is a faster closing of the global output gap, more stable global inflation, higher long-term global growth and greater global financial stability.
And such an improved policy mix would help reduce unwanted side effects of monetary policy, since the burden of stabilisation would be better shared across policies. For instance, in the current environment of global slack, the international spillovers from growth-friendly fiscal policies are likely to be wholly positive, since they primarily boost domestic demand in the home country. That is also true within regions, such as the euro area, where there are different local output gaps.
The upshot is that, in a globalised world, the global policy mix matters – and will likely matter more as our economies become more integrated. So we have to think not just about whether our domestic monetary policies are appropriate, but whether they are properly aligned across jurisdictions.
We have to think not just about the composition of policies within our jurisdictions, but about the global composition that can maximise the effects of monetary policy so that our respective mandates can best be delivered without overburdening further monetary policy, and so as to limit any destabilising spillovers. This is not a preference or a choice. It is simply the new reality we face.
Source: ECB statement
Adauga un comentariu
Adauga un comentariu folosind contul de Facebook
Alte stiri din categoria: Noutati BCE
Mario Draghi, President of the ECB,
Vítor Constâncio, Vice-President of the ECB,
Frankfurt am Main, 14 December 2017 INTRODUCTORY STATEMENT Ladies and gentlemen, the Vice-President and I are very pleased to welcome you to our press detalii
Sustaining openness in a dynamic global economy Speech by Mario Draghi, President of the ECB, at the Economic Policy Symposium of the Federal Reserve Bank of Kansas City, Jackson Hole, 25 August 2017 The global recovery is firming up. In some countries detalii
Decizii de politică monetară (comunicat de presa al BCE) În ședința de astăzi, Consiliul guvernatorilor BCE a hotărât ca rata dobânzii la operațiunile principale de refinanțare și ratele dobânzilor la facilitatea de creditare marginală detalii
Mario Draghi, President of the ECB, Vítor Constâncio, Vice-President of the ECB, Frankfurt am Main, 9 March 2017 Introductory statement to the press conference (with Q&A): Ladies and gentlemen, the Vice-President and I are very pleased to detalii
- Topul bancilor dupa active in 2017
- Topul bancilor cu cele mai mici comisioane la contul curent cu card si online banking
- Topul bancilor dupa active in 2016
- Topul bancilor dupa active in 2015
- Topul bancilor dupa active in 2014
- BNR propune Parlamentului plafonarea dobanzilor la creditele bancilor intre 1,5 si 4 ori peste DAE medie, in functie de tipul creditului; in cazul IFN-urilor, plafonarea dobanzilor nu se justifica
- Legile privind plafonarea dobanzilor la credite si a datoriilor preluate de firmele de recuperare se discuta in Parlament (actualizat)
- Legea privind plafonarea dobanzilor la credite nu a fost inclusa pe ordinea de zi a comisiilor din Camera Deputatilor
- Senatorul Zamfir, despre plafonarea dobanzilor la credite: numai bou-i consecvent!
- Parlamentul dezbate marti legile de plafonare a dobanzilor la credite si a datoriilor cesionate de banci firmelor de recuperare (actualizat)
- Creditele noi acordate de banci au crescut in februarie, dupa cinci luni consecutive de scadere
- Numarul restantierilor din Biroul de Credit urca la cel mai ridicat nivel din ultimele sase luni
- Cate credite noi in euro au acordat bancile in 2017
- Statisticile creditelor acordate de banci populatiei (decembrie 2017)
- Statisticile creditelor acordate de banci firmelor (decembrie 2017)
- Regulament BNR privind institutiile emitente de moneda electronica
- Ordonanta de Urgenta (OUG) nr. 50 din 2010 privind contractele de credit pentru consumatori, actualizata
- Noul Cod Civil
- Legea 677 din 2001 privind protectia datelor personale
- Directiva privind Serviciile de Plata (PSD)
- Banca Transilvania inventeaza POS-uri in forma de cutii de donatii
- Programul agentiilor Raiffeisen Bank in perioada Sarbatorilor de Pasti
- CEC Bank isi informeaza clientii ca serviciile de internet banking si mobile banking nu vor functiona de vineri seara pana duminica seara
- HSBC, by first direct and Bud, is trialling an open banking app model
- Probleme cu autorizarea platilor online cu carduri Mastercard si Maestro
- Economistii Bancii Transilvania estimeaza decelerarea PIB-ului de la 7% in 2017 la 4,2% in 2018
- Cresterea economica este nesustenabila, avertizeaza economistii Bancii Transilvania
- Estimarile economice din Romania sunt modeste, in pofida conditiilor financiare bune (studiu GfK)
- National Bank of Romania could leave unchanged the key rate in 2017
- Poland: EU funds - key factor for growth next year
- Intrebari frecvente despre Biroul de Credit
- Lista bancilor si IFN-urilor care-si raporteaza clientii la Biroul de Credit
- Cum pot fi sters din Biroul de Credit?
- Termenul de depunere a declaratiei unice a fost prelungit pana la 31 iulie
- Romanii au cumparat titluri de stat Centenar in valoare de 786 milioane lei
- Populatia poate cumpara titluri de stat cu dobanda de 5%, de la Trezorerii sau Posta
- Titlurile de stat pentru populatie prin Programul Tezaur se vor distribui si prin Posta Romana
- Ministerul Finantelor amana cu trei luni sanctiunile pentru nedotarea magazinelor cu aparate de marcat electronice
- BRD a fost obligata de judecatori sa explice cum au avut loc fraudele din 2008-2011
- BRD contesta in justitie o decizie a ANAF
- Curtea Constitutionala respinge contestatiile Credit Europe Bank la legea darii in plata
- Procesul dintre Lucian Isar si Banca Comerciala Feroviara
- Raiffeisen Bank pierde un proces cu ANPC
- Oamenii reclama ca nu pot cumpara titluri de stat Centenar la Posta prin transfer bancar sau card, ci doar cu numerar
- Vodafone si Orange, amendate de ANCOM pentru ca si-au suprataxat clientii pentru convorbirile roaming in strainatate
- Ministerul Finantelor anunta ca introduce Declaratia Unica pentru persoanele fizice care realizeaza venituri din activitati economice sau alte categorii de venituri
- Ministerul Finantelor a imprumutat 2 miliarde euro de pe pietele internationale
- Ministerul Finantelor pregateste noi formulare de plata a CAS si CASS, in locul Declaratiei 600
- Numarul fimelor active din Romania, conform statisticilor Registrului Comertului
- Evolutia istorica a cresterii anuale a Produsului Intern Brut (PIB), conform datelor Institutului National de Statistica (INS)
- Evolutia istorica a valorii Produsului Intern Brut (PIB), conform datelor Institutului National de Statistica (INS)
- Transferurile de bani ale romanilor din strainatate au ajuns la 2,1 miliarde euro anul trecut, conform statisticilor Eurostat
- Salariul mediu net si brut lunar pe economie - evolutie istorica intre in anii 1991 - 2016, conform datelor Institutului de Statistica (INS)
- ECB: Insights into the digital transformation of the retail payments ecosystem
- ECB introductory statement on Governing Council decisions
- Speech by Mario Draghi, President of the ECB: Sustaining openness in a dynamic global economy
- Deciziile de politica monetara ale BCE
- Mario Draghi, President of the ECB: Introductory statement to the press conference (with Q&A)
- EBA issues first binding mediation decision between the SRB and the NBR
- Asset repricing, cyber-attacks and Brexit are key risks for EU financial markets, shows ESA report
- EBA publishes its Roadmap on FinTech
- EBA launches 2018 EU-wide stress test exercise
- Opinion on the use of innovative solutions in the customer due diligence process
- Peste 80% din depozitele bancare sunt garantate
- Depozitele bancare nu intra in campania electorala
- FGDB explica modul de aplicare a procedurii de recapitalizare interna a unei banci cu depozitele negarantate ale clientilor (bail-in)
- Valoarea depozitelor garantate de FGDB a crescut cu 50 miliarde lei in ultimul an, la 221 miliarde lei in total
- FGDB aminteste ca toate conturile si depozitele din bancile romanesti sunt garantate in limita a 100.000 de euro
- IMF statement of the 2018 Article IV Mission to Romania
- Jaewoo Lee, new IMF mission chief for Romania and Bulgaria
- IMF concludes article IV consultation with Romania
- IMF statement on the stability of the banking system in Ukraine
- Global House Prices: Time to Worry Again?
- ING Bank si BERD finanteaza parcul logistic CTPark Bucharest
- EBRD hails Moldova banking breakthrough
- Banca Transilvania and EBRD become majority shareholders of Victoriabank in Moldova
- BERD devine actionar Agricover Holding
- Life satisfaction: the pursuit of happiness - EBRD study
- Federal Reserve decided to maintain the target range for the federal funds rate at 1-1/2 to 1-3/4 percent
- Federal Reserve majoreaza dobanda de referinta pentru dolar la 1,5% - 1,75%
- Federal Reserve issues FOMC statement
- A Challenging Decade and a Question for the Future (speech by Janet Yellen, The Fed chair)
- Janet Yellen speech: Financial Stability a Decade after the Onset of the Crisis
- Romania implements SME Initiative: EUR 580 m for Romanian businesses
- European Investment Bank (EIB) is lending EUR 20 million to Agricover Credit IFN
- Infringements: Commission refers Greece, Ireland and Romania to the Court of Justice for not implementing anti-money laundering rules
- Council of the European Union statement on Bulgaria path towards ERM II participation
- Romania, pe ultimul loc in Europa la digitalizare
- Platile in euro vor avea aceleasi comisioane ca cele in lei, a decis Comisia Europeana
- Comisia Europeana prezinta un plan de actiune pentru tehnologiile financiare (FinTech)
- Obligatiunile Bancii Transilvania se tranzactioneaza la Bursa de Valori Bucuresti
- Obligatiunile Good Pople SA (FRU21) au debutat pe piata AeRO
- BVB avertizeaza doua firme ca nu si-au respectat obligatiile de raportare
- Raiffeisen Centrobank (RCB) a lansat produse de investitii tip warrant la BVB
- BVB a initiat procesul de fuziune cu Sibex
ROBOR si lichiditatea
Cornel, concluzia cred ca e corecta. Ea s-a bazat pe declaratiile guvernatorului BNR, Mugur ... detalii
sunteti pe aproape
Problema pe care o puneti pe tapet necesita discutii mai ample. Este o problema serioasa si ... detalii
Daca aveti nevoie de indrumare pentru un credit, va rog sa-mi dati mai multe detalii prin e-mail la ... detalii
Nu aici se aplica pentru credite imbecililor!
Un articol de infomare si o tarla de imbecili care cred ca primesc credit de la acest website. Mare ... detalii
Sa nu cumva sa ne faceti si noua o oferta de conversie ca s-ar putea sa facem infarct. Cea mai ... detalii