is another illustration of the importance of the terms of trade for economies focused on commodities. after experiencing exceptional growth over the last three years, partly driven by the good performance of cocoa prices, contrary to that of other commodities, activity appears to have slowed down, in the wake of the downturn in prices. the subject is also of major importance for central banks because the challenge here is to find how to implement appropriate counter - cyclical policies in the face of large - scale shocks that monetary policy cannot deal with either on its own or in the long run. in this spirit, i would like to share with you this morning some thoughts on two issues : how important are the terms of trade cycles for the economic and financial situation of the exporting poor countries and their neighbours? and how to mitigate shocks? 1 / 3 bis central bankers'speeches 1. how important are terms of trade shocks for poor and vulnerable countries? to illustrate my point, i will take the example of sub - saharan africa. the super cycle of commodity price growth has coincided with over a decade of strong economic growth in subsaharan africa. the degree of causality between these two developments is the subject of debate. before the cyclical downturn, a large majority of observers emphasised the endogenous nature of african growth and minimised, or even denied, the role of the terms of trade appreciation. however, the current terms of trade shock has led to a reversal of the perception of the african outlook. for oil - exporting countries, the twofold decline in prices between mid - 2014 and early 2016 resulted in large budget and external deficits, calling for a rapid adjustment, due to the weakness or lack of countercyclical leeway. the savings accumulated during the upswing in oil prices proved largely insufficient and the borrowing capacity of the countries concerned remains very limited, although some benefited from debt cancellations under the heavily indebted poor countries initiative. in poor and vulnerable countries where financial development is weak and sovereign indebtedness with the banking sector is predominant, the feedback effects between the deterioration in public accounts and rising debt, on the one hand, and liquidity, or even solvency of the banking system on the other, also foster the propagation and amplification of shocks. the current terms of trade shock thus highlights the excessive dependence of vulnerable and poor countries on commodities. 2. how to mitigate terms of trade shocks? on this subject, it seems essential to distinguish two types

does not change that simple reality. hence i would tend to argue that, given the transmission channels of an asset purchase program, its composition and length may matter as much as its size. in any event, increasing the size of the central bank ’ s balance sheet, via large scale asset purchases, sends very important signals. this “ signaling ” operates at several levels. it may contribute to strengthening forward guidance on the policy rate. more importantly, it may have a direct impact on inflation expectations, therefore contributing to lowering real interest rates. when the balance sheet size is explicitly linked to the achievement of an inflation objective as in japan, it may prove an effective tool to communicate the monetary authority ’ s determination – what economists would call a “ commitment device ”. signals on the eurosystem ’ s balance sheet have played a great role in the recent past. in november 2014, the governing council stated that the balance sheet was expected to move toward the dimensions it had at the beginning of 2012. markets started to anticipate an asset purchase program. more recently, the asset purchase program which will last until endseptember 2016 has been an important and clear signal of the expansionary monetary policy stance over an extended horizon. those signaling effects have been very effective and following the announcement of the expanded asset purchase program on 22 january, significant movements took place on financial markets with, inter alia a decline in the forward interest rates across all maturities, a decline in government and corporate debt yields, and a rise in equity prices. 3. are there drawbacks to be feared from the increase in cb balance sheets? the active use of their balance sheets by major central banks has raised a number of concerns. i shall focus on three questions. first, when unconventional monetary policies started to be implemented, many analysts were worried that the expansion of the monetary base would trigger inflationary pressures and central banks would lose control over price stability. as we all know, the reverse happened. broad money aggregates have been basically flat – in the euro area - over the last eighteen months, the money multiplier collapsed and inflation has decreased well below our definition of price stability. second, other, stronger, questions are raised as to the “ quasi fiscal ” implications of central banks ’ balance sheets. there is a perception that expanded balance sheets create a new environment where the relationship between central banks and governments gets more complicated. basically, the expansion would expose central banks to new risks, increase their vulnerability and compromise their independence. third,