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By easing market-based financial conditions, and by putting downward pressure on the real interest rate that banks charge to borrowers, central banks can stimulate aggregate demand, even when short-term interest rates approach the effective lower bound. The validity of this relationship is also crucial for assessing the price effects of monetary policyinduced movements of the exchange rate. With policy being effective in boosting growth, any disinflationary effect of a stronger currency arising from expectations of a tighter future monetary policy stance might be mitigated, or offset, by the ensuing improvement in the economic outlook. However, exogenous shocks to the exchange rate, if persistent, can lead to an unwarranted tightening of financial conditions with undesirable consequences for the inflation outlook. Thank you. References Ahmed, S., M. Appendino and M. Ruta (2015), “Global Value Chains and the Exchange Rate Elasticity of Exports”, IMF Working Paper WP/15/252. Al-Eyd, A. and S. Pelin Berkmen (2013), “Fragmentation and Monetary Policy in the Euro Area”, IMF Working Paper No 13/208. Altavilla, C., G. Carboni and R. Motto (2015), “Asset purchase programmes and financial markets: lessons from the euro area”, ECB Working Paper No 1864. Andrade, P., J. Breckenfelder, F. De Fiore, P. Karadi and O. Tristani (2016), “The ECB’s asset purchase programme: an early assessment”, ECB Working Paper No 1956. 11 / 14  BIS central bankers' speeches  Ball, L., (1998), “Policy Rules for Open Economies”, NBER Working Paper No. 6760. Bernanke, B. and A. S. Blinder (1988), “Credit, Money, and Aggregate Demand”, American Economic Review, Vol.