was then considered the baseline scenario. so, on both the demand and supply sides, there are constraints to effective policy action. i would like to add two key issues to this discouraging perspective : one that aggravates the challenges with a different version of secular stagnation and another that offers some hope related to the role of monetary policy. another version of secular stagnation the version of the secular stagnation hypothesis promoted by robert gordon in a series of papers and in his recent magisterial book is a supply - side phenomenon. 13 the two broad frameworks for secular stagnation are not mutually exclusive. one emphasises supply - side factors that lower potential growth while the other points at chronic weakness in demand as the root cause of secular stagnation. demand and supply factors may, in fact, reinforce each other because a chronic weakness in demand would amplify and exacerbate supply constraints as, for instance, persistent unemployment may hamper workers ’ set of skills, thereby curtailing the productive capacity of the economy. 14 gordon diagnoses a slow - down in the pace of innovation with regard to so called generalpurpose technologies, consisting in inventions that revolutionize living standards and business practices. as he points out, many of these technologies, such as electricity, clean running water, cars and planes, as well as vaccines and antibiotics, were brought to large sections of the population in the time between 1870 and 1970, which he has dubbed the “ special century ” 15. by contrast, he argues that current innovations, such as the internet, improve existing technologies in a less spectacular and more marginal way. the reduction of total productivity growth in the u. s. and other advanced economies, decade after decade since the 70s, offers a compelling empirical case for gordon ’ s views. this gloomy assessment has not gone unchallenged. most prominently, joel mokyr, erik brynjolfsson and andrew mcafee argue that, given recent advances in robotics, genetic modifications, 3d printing, and further innovative technologies, we stand at the cusp of a new industrial revolution. 16 this scenario is certainly desirable. but, as robert gordon has also pointed out : even if innovation is not slowing in absolute terms, global economy is still facing see gordon, r. j. ( 2016 ), “ the rise and fall of american growth : the u. s. standard of living since the civil war ”, princeton university press. see blanchard,

sign that, in recent times, central banks have largely succeeded in delivering their mandates. the mandate entrusted to the ecb is to safeguard price stability in the euro area – i. e. ensuring the value of money over time. specifically, our objective is an annual rate of inflation below, but close to, 2 % over the medium term. note that this definition of price stability is symmetric : inflation should be neither too high for too long, nor too low for too long. history teaches us that deflation, although relatively less common, can have consequences just as destabilising as excessive inflation ; above all for young people, who are generally net debtors, the consequences can be particularly distressing. but to ensure price stability, a currency must be sound in other respects, too. in particular, it must be a reliable unit of account – i. e. its value must be the same across the jurisdiction of the central bank and across whatever forms money takes. the money people use every day, however, is not only that created by the central bank. in a fractional reserve banking system, as is the case in the euro area and other modern bis central bankers ’ speeches economies, the bulk of the money stock takes the form of bank deposits. money is the liability of the banking system as a whole, and it circulates electronically. for money to be “ single ”, then, the payments system has to work smoothly across the jurisdiction – that is actually one of our statutory tasks – and the banking system that creates money has to be sound. it is above all for this reason that we attach great importance to high - quality banking supervision, a task that has been entrusted to the ecb since november last year. and it is for the same reason that we act as lender of last resort to solvent banks in the event of a liquidity crisis. these functions are not designed to protect individual banks per se. they aim to ensure confidence in deposits and their continuous fungibility with banknotes and other forms of money across the union. moreover, as monetary policy impulses are transmitted in part through bank lending channels, sound banks are a prerequisite for ensuring price stability. if only for that reason, countering fragmentation in the banking system falls without doubt within our mandate. the ecb ’ s mandate, in its broadest sense, is based on a consensus rooted in society. politicians receive their mandates from elections which reflect the preferences of the electorate. the ecb ’