performance of the euro area economy. not least, significant deleveraging and de - risking were triggered over several phases, each requiring a distinct response from the ecb. the first phase exposed banks and sovereigns. it started with the liquidity crisis triggered by the collapse of lehman brothers in september 2008. funding markets for banks came to a sudden stop. in response, the ecb – in concert with its counterparts around the world – reacted swiftly. it lowered its main refinancing rate to 1 % in may 2009 and, in order to facilitate banks ’ borrowing of central bank funds, it expanded the range of eligible collateral for its refinancing operations. it also provided liquidity to the banking sector elastically – with no ex ante limit. this caused overnight interest rates to drift down to well below the rate on main refinancing operations. but the severity of the crisis was such that the banking sector remained under pressure. the 1 / 4 bis central bankers'speeches resources of the public sector were mobilised, putting strains on the public finances of those countries whose banking sectors were large relative to their economies. as a result of this assistance to the financial sector, government debt in the euro area as a whole increased by more than five percentage points of gdp. at the level of individual countries, government debt increased in some cases by more than 10 or even 30 percentage points of gdp, not including further – very sizeable – contingent liabilities resulting from state guarantees to banks. the second phase intensified the negative feedback loop between banks and sovereigns. this loop was a source of vulnerability for the euro area for two reasons : first, any impairment of the banking sector ’ s liabilities – including capital − challenged fiscal sustainability in the eyes of investors ; and, second, the value of bonds held as bank assets shrank as their market value eroded. the main consequence of this negative feedback loop was a fragmentation of financial markets along national lines. a lack of liquidity, coupled with the erosion of capital due to losses on sovereign exposures, eventually led to entire national banking systems being unable to access market funding. cross - border bank funding contracted, and has never really recovered since. financial fragmentation impaired monetary policy transmission. markets started to price in redenomination risk for some sovereign bonds, which in turn prevented our accommodative policy stance from reaching businesses and households evenly throughout the euro area. contagion eventually became an acute threat to price stability and to the economy

random walks ” is still the basis of the best practice followed by many institutions. this paper marked the beginning of professor rogoff ’ s long - standing prominence in the field of international finance and was followed by a steady flow of equally distinguished contributions, in some instances literally rewriting history. this was the case with “ the modern history of exchange rate arrangements : a reinterpretation ” co - authored with carmen reinhart and published in the quarterly journal of economics in 2004. professor rogoff has also been at the forefront of modelling efforts in the field of international macroeconomics, particularly with a view of replacing the mundell - flemingdornbusch open economy model, previously the workhorse of virtually all policy analysis in international economics both inside and outside central banks. this ground - breaking effort, reflected in the work written jointly with maurice obstfeld entitled “ foundations of international macroeconomics ”, gave birth to a new field in “ new open economy macroeconomics ” and spurred a vast and ever - growing literature. this new approach has allowed both researchers and policymakers to analyse substantive issues, such as current bis central bankers ’ speeches account and fiscal imbalances, and to provide a welfare - theoretic perspective on global macroeconomic policy. as the imf ’ s chief economist between 2001 and 2003, professor rogoff launched the development of a large - scale version of his model with maurice obstfeld, the global economy model ( gem ), one of the first fully - fledged dynamic stochastic general equilibrium ( dsge ) models to be used for policy analysis. more recently, he has offered us invaluable insights into financial crises. his 2009 bestselling book with carmen reinhart, this time is different, is a landmark work. this tour - deforce, drawing on data for 70 countries over 800 years, provides evidence that financial crises are far more universal, and that there are far more quantitative similarities in their aftermath, than previously believed. the “ this - time - is - different - syndrome ” is a powerful reminder of the dangers of complacency. one key observation is that financial crises are followed by unusually prolonged recessions in economic activity. another valuable insight is that the fiscal and financial dimensions are closely interconnected. fiscal imbalances can undermine the financial sector ; financial sector imbalances can weigh down on the credibility of the sovereign ; both can spillover into the real sector, and vice versa.