the foreign exchange constraint on monetary policy : the bahamian context remarks by governor john a rolle1 forum on the past, present and future of monetary and fiscal policy the government and policy institute university of the bahamas harry c moore library 20 november 2018. good evening. it is a pleasure for me to bring opening remarks for this distinguished panel of past central bank governors, all of whom i know and have worked with in some professional capacity. 2 the common theme in these professional encounters was the appreciation of the scope for which monetary policy could be effective in either a bahamian or caribbean setting ; what contributed to making policy effective ; and the understanding of what constrained policy makers. in the bahamas, we have a commitment to maintain a fixed exchange rate, at one to one against the us dollar. the exchange rate peg is supported by the foreign reserves of the central bank. by law, the currency liabilities of the bank must be matched, at all times, by at least half the equivalent amount of foreign reserves. at present, the central bank tries to target this coverage in the range of 90 % to 100 %. as prepared for delivery. i was introduced to sir william allen in 1988 in my first tour as a summer intern at the central bank of the bahamas. after governor james smith joined the bank, i remember detailed comments he provided on a policy paper i wrote about options for monetary integration in the caribbean. those comments are still relevant today. during governor julian francis ’ tenure, i interacted on many occasions with him about adjustments to exchange controls and monetary policy, including policies which we embraced in the immediate aftermath of the september 11, 2001, terrorist attacks on the us. in fact, governor francis ’ queries motivated most of my research on dollarisation and exchange control liberalisation. governor wendy craigg and i have had the longest relationship of all, as she managed the research department, where my central bank career began, and we both attended regional conferences, where i present papers on the pressing monetary policy themes facing the caribbean. for the peg to be credible, the bank must always be able to supply foreign exchange at the guaranteed rate. under our exchange control regime, this guarantee is binding for all trade and current account transactions. 3 to ensure credible access to foreign exchange, the bank seeks to balance inflows, principally from export earnings against demand stimulated outflows from income, drawdown of savings and domestic credit financed activities. the lever most controlled by the bank is domestic credit. it is focused

peter praet : europe ’ s economic recovery and implications for monetary policy remarks by mr peter praet, member of the executive board of the european central bank, at the international conference of commercial bank economists ( iccbe ) in france, paris, 6 july 2017. * * * since june 2014, the ecb has introduced a range of unconventional measures, alongside our conventional ones, in pursuit of its price stability objective. together, these measures have proved to be extremely effective in preventing a period of disinflation from spiralling into one of deflation. nearly three years on, the risks of deflation have vanished and the transmission of our policy measures to the real economy is clearly evidenced by the recovery, which has gathered some further momentum recently. before turning to price developments and monetary policy, let me say a bit more about the latest economic developments in the euro area. the solid upswing continues to broaden across sectors and countries. real gdp in the euro area has expanded for 16 consecutive quarters, growing by 1. 9 % year - on - year during the first quarter of 2017, according to eurostat. this compares with the latest potential growth estimates for the euro area of just over 1 %. 1 moreover, recent survey data point to a strong start to the second quarter. for example, the composite output purchasing managers ’ index – which is strongly correlated with growth in the euro area – remains close to six - year highs in june. the forward - looking components of the survey continue to point to growth in the quarters ahead. moreover, economic sentiment is at its highest level in nearly a decade and has increased notably from may to june 2017. 2 unemployment is at its lowest level in eight years. looking ahead, the latest eurosystem staff macroeconomic projections point to a continued economic expansion at a somewhat faster pace than previously expected. the breadth of the economic recovery is also notable. the dispersion of growth rates across both countries and sectors is at its lowest level in two decades, reflecting a convergence of growth rates around higher levels. this is reassuring for the growth outlook because recoveries tend to be firmer and more robust when they are broad - based. it ’ s a similar picture for employment, with dispersion of employment growth rates across euro area countries at its lowest level on record. the increasingly solid cyclical recovery reflects the success of our monetary policy measures, which have worked their way through the financial system and led to a significant easing of financing conditions for consumers