16.11.2018  Remarks - First panel: “Central banks, macroeconomic stability and economic growth” Banco de España and European Institute of the Mediterranean with the support of the Central Bank of Tunisia Pablo Hernández de Cos Governor  In this first session of the conference we will focus on the role of central banks on both shores of the Mediterranean in contributing to the achievement of sustainable growth in the long term. Before giving the floor to our distinguished speakers, let me say a few words about the current global outlook and their implications for economic policymaking. At present, the global economy seems to be approaching its cyclical peak while the process of monetary policy normalization in the advanced economies continues, particularly in the United States. This process should normally precede the tightening of global financial conditions. At the same time, tensions in international trade remain, with the risk that disputes in this area will be solved with a greater use of protectionism to the detriment of a multilateral approach to the resolution of these conflicts; and, elsewhere, the markets of some emerging economies that had significant macroeconomic imbalances have undergone episodes of severe turbulence. We are therefore facing a phase of growth moderation with limited scope for economic policies. It would seem necessary to harness the current moment in which growth records are still satisfactory in order to generate margins that allow a certain countercyclical gearing of economic policies in the future.

Population ageing, by increasing the relative supply of savings, explains most of the fall across several advanced economies. A low or even negative natural interest rate poses new challenges for stabilisation policies. The lower bound on the nominal policy interest rate may more frequently be binding, and not just in episodes of acute crisis. This leads to the conclusion 3/5  that non-conventional monetary measures may ultimately be used more frequently than originally expected. In addition, many emerging economies face the gradual tightening of global financial conditions in a context of slowdown in their economic activity. In particular, this context is especially challenging for the economies that receive capital flows. In these cases, economic authorities must foster a stable macroeconomic environment and sound institutions that attract permanent capital flows. The widespread scant room for manoeuvre for the traditional stabilisation tools we have witnessed calls for the development of other policies to relieve monetary policy of the excessive role it has played post-crisis in maintaining financial stability. One of the lessons of the crisis is the importance of including new instruments in the policy toolkit, namely macroprudential policy. Therefore, it is essential to identify risks and vulnerabilities to the economy that may stem from the financial system affecting the real economy or vice versa. In any event, it is of paramount importance to develop the appropriate macroprudential instruments covering both bank and non-bank financial intermediation to tackle these risks in order to have a stable financial system with countercyclical buffers that support sustained economic growth.