we live in : παντα ρει ( panta rhei ), he said. everything flows. in 1789, benjamin franklin took a somewhat lighter view when he joked : “ in this world nothing can be said to be certain, except death and taxes ”. today, i do not intend to talk about death, nor about taxes. instead, i would like to focus on a few aspects of change and how economists and monetary policymakers grapple with them. this is also a central theme underlying this conference, as i am going to highlight. from the 1980s onwards, advanced economies experienced a period of remarkable economic 1 / 7 bis central bankers'speeches stability. swings in inflation and output growth lessened to such a degree that it came to be known as the “ great moderation ”. 1 it was around the time of the great moderation that the idea of the inflation targeting framework for monetary policy spread. committing to keeping inflation low, in many cases at around 2 %, helped many central banks to anchor people ’ s inflation expectations and to successfully manage short - term economic fluctuations. new keynesian models suggested the existence of a “ divine coincidence ” 2 – that by stabilising inflation, output swings would be minimised as well. this was certainly a period of bliss. and hopes were high that it was only the start of many more years of stability to come. some even dared to ask whether the business cycle had ended. 3 in retrospect, one might be forgiven for thinking that it sounded a bit like the “ end of history ” for monetary policy. and – also in economics – it appears that such high hopes may be a reliable indicator that very soon, the plot will take a surprising turn for the worse. as we all know, this period of economic calm ended in what today is called the “ great recession ”. inevitably, several of the convictions underlying the pre - crisis monetary policy framework have been questioned since then. the pre - crisis consensus held, for example, that monetary policy should focus exclusively on using short - term interest rates in order to stabilise consumer price inflation. it was thought that identifying financial bubbles was costly and ineffective, and that monetary policy ’ s contribution to financial stability should be confined to mopping up the damage once a bubble had popped. now, the debate is on whether to “ lean ” or to “ clean ”. should central banks actively use monetary policy also to prevent the build - up of asset price bubbles

evidence of this relationship for euro area periphery countries. 10 studies by the oecd confirm that a non - negligible percentage of firms in some eu countries can be classified as ” zombie firms ”. 11 for instance, in 2013, 28 % of capital resources in greece, 19 % in italy and 16 % in spain were sunk in firms that were unable to cover their cost of capital. 3 / 7 bis central bankers'speeches economists fabiano schivardi, enrico sette and guido tabellini have shown how the health of the banking system influences capital allocation. 12 they estimate that credit misallocation in italy reduced annual gdp growth by between 0. 2 and 0. 35 percentage point in the 2008 to 2013 period. what can be done to improve capital allocation? research suggests that effective restructuring and resolution regimes incentivise banks to grant credit prudently and can therefore improve economic growth. 13 progress has been made with regard to the reduction of non - performing loans on the books of euro area banks. but more needs to be done to resolve this issue as quickly as possible. in countries with low - npl banking systems, it would also help to alleviate concerns about the risks which might have to be shouldered when moving to a european deposit insurance scheme. the main takeaway from session i seems to be that levers such as competition policies have to be pulled in order to improve allocative efficiency. this resonates well with the message which the governing council has been stressing for years now : structural policies are key to shifting the economy towards a higher growth path. however, the findings on mark - ups may also have important implications for inflation. here, it may be convenient to distinguish between longer - term and cyclical aspects. if mark - ups have indeed risen in the united states over a long period of time, they should have produced upward pressure on prices, all else equal. along these lines, jan eeckhout may suggest later that the us inflation rate was lifted by about 1 percentage point per year from 1980 to 2014, as the average mark - up rose. 14 thus, absent this effect, inflation would have even been markedly lower in recent years than it actually was. this would render the phenomenon of subdued inflation in the face of a tighter us labour market all the more puzzling. on the other hand, the bundesbank study i just mentioned finds evidence of a procyclical behaviour of mark - ups in european countries. especially during