4 percent on average, while the magnitude of this effect might be significantly larger in the case of a severe crisis. if history is any guide, we should also take note of imf studies which have found that, in advanced economies, recessions associated with financial crises tend to be unusually severe and long lasting, with output taking, on average, three years to recover to its pre - crisis peak. studies by reinhart and rogoff have provided further evidence in this direction. similarly, globally synchronised recessions are often long and deep and are generally followed by weak recoveries. in addition, the risk of global stagflation should not be underestimated. the emergence of a multi - speed recovery, with developing economies leading the way, might put upward pressure on commodity prices at a time when labour markets are weak and the recovery still fragile. let me also provide some thoughts on a debate that was recently raised by the imf as to whether central banks should err on the lax side and aim at higher inflation rates in order to minimise the likelihood of deflation. while i do see the temptation for governments to ask for higher inflation in order to monetise the dramatic build - up of public debt, let us not forget that it serves to expropriate the income and wealth of the general public to the benefit of those who have lived beyond their means. i can only reject the idea of raising inflation rates permanently. i would not like to imagine the consequences if, on top of the current financial fragilities and in an environment of high public debt, the general public were to lose trust in the purchasing power of money. there is no evidence whatsoever to support that deviating from price stability and aiming at an inflation rate of 4 % would enhance economic prosperity or growth. on the contrary, a considerable body of empirical research finds that the phillips curve has a negative bent in the long run : inflation and inflation volatility penalise capital formation and thus detract from the economy ’ s growth potential. finally, given the uncertainties enshrouding the post - crisis economic environment, it is worth recalling the lessons of japan ’ s “ lost decade ”. one lesson is that the financial system needs to be repaired first, before a durable economic recovery can be initiated. another lesson is that reforms should not be delayed. and finally, in the absence of these reforms, the recovery may be slow, fragile and prone to reversals. if they are

localised shocks. this would create private risk - sharing across the euro area and shield regions from localised credit crunches. but a level playing field for banking would also enable risk reduction. increased cross - border competition between banks, backed by a solid system of european supervision and the winding down of unwarranted national protections, could further incentivize banks into getting their balance sheets in order. at the same time, the srf and edis would also constitute a form of private risk - sharing by providing a final, powerful backstop. they enable bank resolution, limit contagion in the case of bank defaults thereby contributing to safeguarding overall financial stability. this, in turn, would reduce the need for public risk - sharing in the first place. such an approach is borne out by the experience of other advanced economies, such as the united states, where hundreds of banks were resolved successfully by the federal deposit insurance corporation with no long - term fiscal costs. while the case for completing the banking union is strong, supporting edis is seen by some as tilting at windmills. indeed, three years after the initial commission proposal, progress has been very limited. but the potential benefits of edis are not the illusions of a romantic daydreamer like don quixote ; they are, in fact, very real. edis would provide uniform confidence in deposits across europe which would be beneficial for all european economies, as no single banking system is immune to a potential bank default. edis would therefore further underpin emu by ensuring that a €1 deposit is just as safe, and just as valuable, wherever you are in the euro area. fostering the resilient and sustainable development of europe ’ s financial landscape completing the post - crisis agenda is therefore crucial, but we should not only look back. after dealing with banking sector fragilities, we should now be shifting our attention to the steadily growing non - banking system, which is changing europe ’ s financial landscape and whose potential to contribute to growth has not been fully unlocked. a range of banking activities is increasingly carried out by non - banks, notably insurance companies and the investment fund sector at large. total assets of the euro area investment fund sector have expanded by roughly 170 % between 2008 and 2017, on account of both net cash inflows and rising asset valuations. 2 / 4 bis central bankers'speeches deeper and more efficient bond and equity markets in europe would permit economies of scale and allow capital