The expansionary monetary policy stance was strengthened by the announcement that the ECB expects official interest rates to remain at or below the new level for a prolonged period. Along with these external factors, the Spanish economy has also benefited from other developments that have helped temper the contractionary pressures on demand and activity during this year. Household spending began 2013 weighed down by the impact of the decline in employment on income from work and by the debt-reduction process. However, as the year unfolded,  BIS central bankers’ speeches  1  improved confidence and the somewhat less unfavourable state of the labour market have meant that private consumption has begun to pick up. Further, according to the available indicators, investment in equipment has posted increases in the first nine months of the year. In a setting in which sluggish domestic demand, ongoing corporate deleveraging and the restrictions on access to financing continue to check investment, this improvement stems, above all, from the strong pace of goods and services exports, which would have led to greater investment activity by exporting firms. Moreover, construction, as a whole, has continued shrinking, owing to the adjustment in residential investment and in public works. General government consumption spending has also carried on falling. As a result, national demand has continued to decline, albeit at a progressively slacker pace. The positive contribution of the external sector to activity has increased in 2013.

The race to zero may have contributed to those abnormalities, adding liquidity during a monsoon and absorbing it during a drought. This fattens tail risk. Understanding and correcting those tail events is a systemic issue. It may call for new rules of the road for trading. Grit in the wheels, like grit on the roads, could help forestall the next crash. 14  BIS central bankers’ speeches  References Aldridge, I (2010), “High-Frequency Trading: A Practical Guide to Algorithmic Strategies and Trading Systems”, Wiley Publications. Arestis, P and Demetriades, P (1997), “Financial Development and Economic Growth: Assessing the Evidence,” The Economic Journal, Vol. 107, No. 442 (May, 1997), pp. 783–799, Blackwell Publishing for the Royal Economic Society. Automated Trader Magazine (2010), “What just happened?”, Issue 18(3), available at: http://www.automatedtrader.net/articles/risk/50335/what-just-happened. Bouchaud, J, Farmery, J D and Lill, F (2009), “How markets slowly digest changes in supply and demand,” Santa Fe Institute working paper. Blackledge, J (2008), “Application of the fractal market hypothesis for macroeconomic time series analysis,” ISAST Transactions on Electronics and Signal Processing, Vol. 1(2), pp. 89–110. Brogaard, J (2010), “High frequency trading and its impact on market quality”, mimeo. CFTC-SEC (2010), “Findings regarding the market events of May 6, 2010”, Report of the staffs of the CFTC and SEC to the joint advisory committee on emerging regulatory issues, September 30. CFTC-SEC Advisory Committee on Emerging Regulatory Issues (2011), “Recommendations regarding regulation to the market events of May 6, 2010”, available at: http://www.cftc.gov/ucm/groups/public/@aboutcftc/documents/file/jacreport_021811.pdf.