Materialization of such a scenario could lead to temporarily lower policy rates than envisaged in the baseline scenario and the use of macroprudential instruments in the direction of tightening in order to cut the pace of credit growth in tandem with the temporary rate cuts. The second scenario illustrated in the chart was shared with the public in our Inflation Report of October 2010. Both recent economic developments in Europe and decisions taken  BIS Review 174/2010  3  by central banks of developed countries increase global economic uncertainty significantly. Should the measures taken at a global level cause long-term and high-rated increases in food and commodity prices, and should such increases lead to a deterioration in the price setting behavior, which in turn, hampers achieving the medium-term inflation targets, an earlier-than envisaged tightening in the baseline scenario would be considered. In this case, as domestic credit expansion would weaken, the use of macroprudential instruments might not be needed in the direction of tightening. If measures taken in developed countries remain inadequate, the third scenario illustrated in the lower left-hand part of the chart might be considered. In that case, as indicated in the latest Inflation Report, should the global economy face a longer-than-anticipated period of anemic growth, the monetary tightening envisaged to start in the final quarter of 2011 under the baseline scenario might be postponed. Moreover, an outcome, whereby global economic problems intensify and contribute to a contraction of domestic economic activity, may trigger a second round of easing.

4  See Hélène Rey, 2013, “Dilemma not trilemma: The global financial cycle and monetary policy independence”, paper presented at the Jackson Hole Economic Policy Symposium. Incidentally, Hélène Rey was the 2006 Germán Bernácer Prize winner. 5  For more details on the construction of the measure see Scott Baker, Nicholas Bloom and Steven J. Davis, 2012, “Measuring economic policy uncertainty”, working paper, Stanford University. 2  BIS central bankers’ speeches  account for a significant proportion (10–30%) of the differences in productivity between firms and between countries.6 Their research did not stop at documenting the impact of the differences in management practices. They also offered suggestions for policy interventions that could encourage the uptake of good management behaviour. Competitive and flexible markets enable managers to re-optimise resources within and outside the firm more easily. Educational standards matter as well. Better-managed firms have better educated workers and they use them more efficiently. Moreover, better educated managers have necessary skills to adopt state-of-theart management practices and adapt to changing environment. This enables them to maintain and improve their global competitive position. Multinational companies also have a strong positive effect, as they transplant their management styles to the countries in which they operate.7 These research-based conclusions highlight a key role of structural reforms in the wake of the global economic crisis. Countries with more competitive market conditions, better education and more investment in R&D and innovation policies can maximise the beneficial impact of managerial capital on productivity and growth.