This was the case with “The Modern History of Exchange Rate Arrangements: A Reinterpretation” co-authored with Carmen Reinhart and published in the Quarterly Journal of Economics in 2004. Professor Rogoff has also been at the forefront of modelling efforts in the field of International macroeconomics, particularly with a view of replacing the Mundell-FlemingDornbusch open economy model, previously the workhorse of virtually all policy analysis in international economics both inside and outside central banks. This ground-breaking effort, reflected in the work written jointly with Maurice Obstfeld entitled “Foundations of International Macroeconomics”, gave birth to a new field in “new open economy macroeconomics” and spurred a vast and ever-growing literature. This new approach has allowed both researchers and policymakers to analyse substantive issues, such as current  BIS central bankers’ speeches  1  account and fiscal imbalances, and to provide a welfare-theoretic perspective on global macroeconomic policy. As the IMF’s chief economist between 2001 and 2003, Professor Rogoff launched the development of a large-scale version of his model with Maurice Obstfeld, the Global Economy Model (GEM), one of the first fully-fledged Dynamic Stochastic General Equilibrium (DSGE) models to be used for policy analysis. More recently, he has offered us invaluable insights into financial crises. His 2009 bestselling book with Carmen Reinhart, This Time Is Different, is a landmark work. This tour-deforce, drawing on data for 70 countries over 800 years, provides evidence that financial crises are far more universal, and that there are far more quantitative similarities in their aftermath, than previously believed.

Sustained buying of government paper by the central bank would only postpone problems and delay the necessary fiscal adjustments, ultimately resulting in a build-up of inflationary pressures. The ECB has never hesitated to reaffirm and remind all Member States, in very concrete terms, that compliance with the principles of budgetary discipline is absolutely fundamental. Naturally, since member states do not control their currency alone, they are vulnerable to liquidity episodes and multiple equilibria. Creditors’ assessments can change, e.g. via contagion effects, even when the fundamentals would not justify it. The high degree of financial integration within EMU means that, if left unchecked, contagion in the banking sector can spread rapidly via cross-border holdings of sovereign debt. For the sovereigns themselves, sudden shifts in market re-pricing of risk can lead to unexpected liquidity challenges. These dynamics underscore the importance of strengthening the mechanisms that prevent such risks – the SGP, surveillance of broader macroeconomic imbalances and stronger financial supervision. However, the liquidity dry-ups and the contagion risks also call for stronger backstop mechanisms, to provide significant, albeit temporary, liquidity assistance. The SMP aims to create a better functioning transmission mechanism of monetary policy to all parts of the monetary union and is therefore in full compliance with the prohibition of monetary financing. Also, we sterilise the impact of the SMP on our total liquidity provision.