support to the most vulnerable households and firms. but this support must be temporary and targeted. in particular, we need to avoid a general fiscal stimulus that amplifies current inflationary pressures or a permanent increase in fiscal imbalances that would weigh on public debt sustainability. in other words, consistency between fiscal and monetary policy is of the utmost essence. and beyond this immediate response to the crisis, governments need to look beyond the current juncture and press ahead with structural reforms to increase medium - term growth potential. in particular, they should focus on the green transition and rethink the functioning of energy markets. moreover, the most indebted countries should, with a medium - term perspective, reinforce the sustainability of their public accounts. a particular difficulty when designing policy responses in the current context is the extraordinary uncertainty and volatility currently surrounding the global economy, which generates risks of policy miscalculation and disruption to financial markets, and requires policymakers to stand ready to adjust policies depending on how the situation evolves. this is clearly how monetary policy is currently being conducted, with data - dependent decisions being made on a meeting by meeting basis, but this may be more difficult to achieve in the case of fiscal policy, given the longer implementation lags involved. from a more global perspective, economic policy - making is facing the challenge of increasing geopolitical tension. if this trend ends up triggering a scenario of runaway fragmentation, the consequences in terms of trade and financial flows, productivity, inflationary pressures, and ultimately economic activity would be very severe. with this in mind, it is not difficult to conclude that, amid the increasing risk of fragmentation in the international sphere, strengthening supranational policies and institutions, which support international cooperation, is more important than ever. i firmly believe that our multilateral system, with the necessary reforms and adaptations to the new circumstances, remains pivotal to global progress, as has been the case over the last few decades. in this respect, i believe that forums like this one are an example of fruitful international cooperation, insofar as they enhance regional cooperation and dialogue. the theme of this conference, building resilience in uncertain times : safeguarding financial stability, encouraging investments, is particularly timely. today we are going to debate a number of challenges that our countries are currently facing : from the role of central banks in the current uncertain environment to the reforms needed to improve the business climate in the region, as well as the impact of digital finance on

luis m linde : monetary policy following the great recession presentation by mr luis m linde, governor of the bank of spain, of the papeles de economia issue : “ monetary policy following the great recession ”, fundacion de las cajas de ahorros, madrid, 13 june 2014. * * * let me first thank funcas for their kind invitation to inaugurate this presentation of the issue of the review papeles de economia espanola dedicated to “ monetary policy after the great recession ”. in my address i will briefly review the predominant view before the crisis. i will then discuss how the crisis has affected this consensus. finally, i shall conclude with some thoughts on two changes which, as a result of the foregoing, are already taking place in monetary policy conduct : how to structure its interaction with macro - prudential policy and the role of unconventional monetary tools. before the crisis before the crisis, low inflation, low price volatility and the high degree of economic stability attained in the advanced economies enabled a certain consensus to be forged on what the essential components of a successful monetary policy should be. monetary policy would be delegated to an independent central bank whose remit saw the maintenance of price stability as its main objective. this objective, in turn, could be translated into a more explicit goal in terms of inflation targets. to fulfil its mandate, the central bank would confine itself to controlling the short - term interest rate. its interventions would be transmitted to the real economy through three main channels : the long - term interest rate, inflation expectations and financial asset prices. the credit channel played a secondary role. indeed, in most of the macroeconomic models used by central banks, the private banking sector would play a marginal role, if any at all. the assumption of financial market efficiency and self - regulation meant that credit was not a central variable. the consensus then prevailing also had it that, in order to ensure financial stability, it sufficed to supplement price stability with regulatory and micro - prudential supervisory policy action geared to ensuring the strength of individual credit institutions. in step with this concept, the role of monetary policy in the face of potential risks to financial stability would be confined to cleaning up or repairing damage when such risks ultimately materialised. the federal reserve ’ s measures following the bursting of the “ dot. com ” bubble illustrate this type of conduct. the crisis from the summer of 2007 and, above all