francois villeroy de galhau : secular stagnation and growth measurement speech by mr francois villeroy de galhau, governor of the bank of france, at the secular stagnation and growth measurement conference, organized by the bank of france, paris, 16 january 2017. * * * accompanying slides ladies and gentlemen [ slide 1 ], i am very pleased to welcome you all to paris, for this conference on “ secular stagnation and growth measurement ”. we should always be cautious when using expressions as categorical as “ secular stagnation ”, and which describe the long term : alvin hansen, who coined it in 1938 with his famous “ full recovery or stagnation ”, lived long enough – until 1975 – to see thirty years of almost full recovery, instead of stagnation. nevertheless, this risk, popularized again recently by larry summers, is a matter of concern for central bankers. why? because a persistent slowdown in trend output growth could make the economy more vulnerable to shocks that push the natural interest rate below the effective lower bound. whether secular or lasting for many years, very slow growth and inflation also challenge the efficacy of conventional monetary policy tools. they can affect the sustainability of public and private debt. and beyond central banking concerns, they can also alter the functioning of our social models. let me just clarify that i will not speak about monetary policy today, as we are in our “ silent period ” before the governing council meeting. allow me to say simply that some of the more recent comments about a “ come back of inflation ", which would allegedly put the governing council under strain, seem greatly exaggerated. so, where do we stand? the slowdown in per capita growth in advanced economies can actually be traced back to the 1970s [ slide 2 ]. it worsened in several stages, the latest starting in the mid2000s, after the ict revolution and before the great recession. the issue is that this prolonged slowdown raises questions about future potential growth, largely due to uncertainty about productivity trends. to assess the risks, i would like to elaborate on the three hypotheses that form the basis for today ’ s conference [ slide 3 ] : first, are we simply underestimating growth? second, is the slowdown a demand phenomenon? third, is it a persistent phenomenon due to a slowdown in the pace of innovation? 1. are we underestimating growth? new technologies usually lead to a mismeasurement of output.

represents an existential challenge, and innovation is the only effective response. this digital revolution also means we have to strengthen our methods of regulation to deal with the bigtechs, which are now an unavoidable feature of the market but are still on the margins of existing regulation. we need cross - border cooperation, but also cooperation that is cross - field, with authorities in competition, data protection and cybersecurity. the fsb, bis and oecd should muster forces on this. cyber risk, in particular, is more than ever in the spotlight, with the accelerating digitalisation of services and increased use of teleworking. in parallel, european banks must unite resolutely in the field of payments, and rapidly develop a shared offering : there is no alternative to the epi, european payment initiative. this digital revolution is also putting creative pressure on our supervisory practices. let me reiterate here that fintechs are very welcome in the french financial landscape, and have the right to an open and attentive dialogue with the acpr, including in the fintech - innovation unit created in 2016. artificial intelligence is providing fertile experimental ground for our interactions. in fact, the acpr is organising its first techsprint on 30 june and 1 july this year. this friendly competition will invite participants to invent tools to explain the algorithms of tomorrow, using credit risk models. the call for applications is being published today on the acpr website, and i invite all players in the field of ai to take part. i shall conclude by talking about a third ambition : the ecological transition. to achieve this, our financial institutions will have to play their full part in fighting global warming. i would like to take the opportunity here to commend the climate leadership of france, which is at the forefront of efforts in europe and the world. despite the covid crisis, our principal financial institutions willingly volunteered to carry out their first climate resilience tests. the exercise revealed that their exposure to transition risks is on the whole “ moderate ”, and that it will be even better controlled if the transition is orderly and not delayed. green finance also represents a huge opportunity for development. in short, the sooner the financial sector starts, the smoother the transition will be, with financial institutions playing an active role rather than just being followers. thank you for your attention. i top 6 france : 15. 6 %. top 4 france : 14. 8 %.