have adopted its guidelines, acting with greater subtlety when setting these standards, and also in their dialogue with other regulators. the present serious financial crisis has shown that fair value is an accounting concept and doctrine that has no better alternative, but that also should not be inappropriately applied. allowing transparent dynamic provisioning would help to reduce the more harmful effects of credit cycles and, therefore, to produce economic growth with minimal fluctuations. second, i believe that regulators and supervisors, and central bankers too, must further discuss procyclicality, the impact of accounting and prudential standards on the credit cycle, and how monetary policy interacts with the credit cycle. our experience with the statistical provision may be useful, although it is not necessarily either the best or the only solution. the important thing is that we should be ready to discuss countercyclical mechanisms, in provisions, in capital and wherever we believe they might be appropriate and feasible. finally, but no less importantly, we should enter into international agreements to ensure that countercyclical mechanisms are applied consistently in all countries. a global banking system requires uniform and internationally coordinated responses. i assure you that applying prudential measures in isolation is not an optimal situation, even if such measures are shown to be the most appropriate ones. * * * behind the ideas of white and rojo ( weiss und rot ) that i have set out today were many other economists who i have not been able to mention, and who also contributed to help us to smooth cycles and strengthen credit institutions in the future. i have referred to these two because i wanted to pay tribute to all those economists that with their ideas and research, are seeking to make life easier for us and helping us to take better decisions. now, in the recessionary phase of the cycle, we can see very clearly that it was rojo and white who were right, and that other economists who underestimated the explosion in leverage and who did not worry about designing regulations forcing banks to strengthen themselves during the upswing were wrong. today, with the benefit of hindsight, we know who was right. next cycles will face us with fresh challenges but i hope that this experience will help us to meet them. thank you very much and enjoy the wine – red or white ( rot oder weiβ ) – you have chosen.

( 2020 ), “ debt rule design in theory and practice : the sgp ’ s debt benchmark revisited ”, working paper series, no 2379, ecb. 18. kamps, c. and hauptmeier, s. ( 2020 ), ibid. 19. see born et al. ( 2020 ), “ does austerity pay off? ”, review of economics and statistics, vol. 102 ( 2 ), pp. 323 - 338 ; and auerbach, a. j. and gorodnichenko, y. ( 2017 ), “ fiscal stimulus and fiscal sustainability ”, nber working paper series, no 23789. 20. schnabel, i. ( 2020 ), “ the shadow of fiscal dominance : misconceptions, perceptions and perspectives ”, speech at the centre for european reform and the eurofi financial forum on “ is the current ecb monetary policy doing more harm than good and what are the alternatives? ”, 11 september. 21. see also hendren, n., and sprung - keyser, b. ( 2020 ), “ a unified welfare analysis of government policies ”, the quarterly journal of economics 135 ( 3 ), pp. 1209 - 1318 ; abiad, a., furceri, d. and topalova, p. ( 2015 ), “ the macroeconomic effects of public investment : evidence from advanced economies ”, imf working paper series, 15 / 95. contact european central bank directorate general communications sonnemannstrasse 20 60314 frankfurt am main, germany + 49 69 1344 7455 media @ ecb. europa. eu reproduction is permitted provided that the source is acknowledged. media contacts copyright 2021, european central bank