discussion on the need for a european safe asset. if well designed, such a european asset could become the benchmark for investors in eu capital markets, reduce the incentives for capital flight on national bonds within the euro area and contribute to lowering risks on banks ’ balance sheets. deeper financial integration will strengthen emu and ultimately enhance the international role of the euro more developed and integrated banking and capital markets play a complementary role in financing the real economy by providing different sources of financing adapted to various funding needs and stages of firm development. they also help to match borrowers and investors in an 3 / 4 bis central bankers'speeches efficient way. efficient capital and banking markets also contribute to fostering cross - border private risksharing via the credit and capital channels, which reduces the need for public risk - sharing and enhances the resilience of emu. we therefore need to promote a european approach to financial integration so that we can complete both the banking union and the capital markets union. achieving developed, integrated eu markets that are open and attractive to international investors would ultimately reinforce the role of the euro on the international stage. 9 1 the ecb regularly releases a set of financial integration indicators and since 2007 has published a report on “ financial integration in europe ”. integration is measured using both price and quantity - based composite indicators. they aggregate market - specific indicators related to money, bond, equity and banking markets, thereby offering a comprehensive overview of financial integration in the euro area. 2 ecb ( 2018 ), financial integration in europe, special feature b “ integrating euro area corporate bond markets : benefits and potential financial stability challenges ”. 3 see ecb ( 2018 ), “ risk sharing in the euro area ”, economic bulletin, issue 3, and alcidi, c., d ’ imperio, p. and thirion, g. ( 2017 ), “ risk - sharing and consumption smoothing patterns in the us and the euro area : a comprehensive comparison ”, centre for european policy studies working document, no 2017 / 04, may. 4 ecb ( 2017 ), financial stability review, special feature b : “ cross - border banking in the euro area since the crisis : what is driving the great retrenchment? ”, november, and ebatransparency exercises and ebastress test exercises, 2013 – 2018. 5 ecb ( 2017 ), financial integration in europe, special feature “ cross - border bank consolidation in the euro area ”. 6 see

that this asset will be included in a specific measure of money. similarly, if investors ’ funding increase, i. e. monetary liquidity is higher, this will probably increase financial market liquidity. monetary policy has to distinguish between the potential short and long term impacts of increased global liquidity. in the short run, global liquidity can affect asset prices and as such indirectly domestic economic conditions. wealth effects and international capital flows are possible channels. furthermore, global liquidity may affect international commodity prices and the prices of these commodities can influence the terms of trade as they are used as inputs in production processes. thereby, they can affect domestic prices of some goods. indeed, while commodity prices have retreated more recently, many are still close to historically high levels and have put some pressure to prices via the described channels. interestingly enough, commodities – besides serving as consumption and intermediary production goods – can to a large extent be understood as assets, which can be traded on futures markets and / or hoarded for speculative purposes. also, with respect to consumer prices, empirical research has shown that national inflation is partly determined by global economic dynamics. moreover, recent studies indicate that inflation in mature countries is “ largely a global phenomenon ”. at the current juncture, new sources of inflationary pressure may therefore emerge. let me give some examples. the combination of dynamic economic growth, accompanied by accelerated inflation in emerging markets bears the risk that imported inflation will come to play a larger role in domestic price levels in the industrialized world. the recent increases in prices of certain agricultural products and raw materials may therefore be more persistent than currently assumed. the lagged effect of food prices could still add a layer of headline inflation in other words : the disinflationary impact of globalization, from which the industrialized world has benefited in the last 20 years, could turn into an imported inflationary impact. it seems reasonable that common global factors play an important role for domestic liquidity conditions. empirical evidence suggests that global liquidity is affecting consumer price inflation. this is even more apparent for asset price inflation which is clearly reactive to global liquidity shocks. the growing importance of the external environment does not mean that domestic monetary policy is powerless. by contrast, under a flexible exchange rate regime the effects of global bis central bankers ’ speeches liquidity on domestic inflation can be overcome by active domestic monetary policy, in particular in the long run. an independent central bank is able to stabilize a well - defined index of domestic prices despite