##eding, estimates of the size of the output gap have to be made with caution. strong growth may be leading to higher potential output, as crisis - induced hysteresis may be reversed in conditions of stronger demand. and the effects of past structural reforms, especially in the labour market, may now be showing up in potential output. for example, three - quarters of employment growth over the recovery has come from older workers and more than half from women. this is in part because past labour market reforms have encouraged both groups to enter the workforce in response to higher growth. 7 if substantially more workers can be drawn into the labour force, it would be possible for the labour market to strengthen further without generating wage pressures. in this environment, policymakers have to be more cautious than in the past about the assumptions that underpin our forecasts – and simple policy rules based around estimates of the output gap are no longer a useful guide for our actions. the severity of the crisis means that we cannot rely exclusively on traditional historical relationships to determine how quickly real developments will be passed through into nominal ones. the key issues we need to examine are wage dynamics, their pass - through to prices, and the possible risks to the inflation outlook. wage growth has been trending upwards for the euro area as a whole, rising by 0. 5 percentage points from the trough in mid - 2016. 8 but consistent with the weakening of the relationship between slack and inflation, the adjustment of wages during the recovery has so far been atypically slow. that said, our analysis suggests that, as the cycle advances, the standard wage phillips curve should hold better for the euro area on average. the unexplained residuals in the model – which in the past were sizeable – are diminishing, suggesting the link between unemployment and wages should improve. moreover, the anchors for wage formation are gradually becoming more aligned with our inflation objective. backward - looking factors appear to be becoming less important, and the forwardlooking anchor, inflation expectations, is strengthening. phillips curve decompositions find that past low inflation dragged down wage growth from its long - term average by around 0. 2 percentage points each year between 2014 and 2017. but these same analyses suggest that, as headline inflation recovers to more normal levels, the impact of past low inflation on wages could be waning. in terms of the pass through from wages to prices, the signals remain mixed. as wages have picked up, labour productivity has also recovered

any economic sectors unscathed. and it is safe to say that these upheavals will force market participants to reprice many assets. does the term " stranded assets " mean anything to you? to hit the 2 degrees celsius target, we will need to curb the amount of carbon dioxide we emit worldwide. at a rough estimate, our co2 2 / 7 bis central bankers'speeches emissions are probably not much more than 1, 000 gigatonnes away from exhausting our budget. however, the co2 content of the known fossil fuel reserves still in the ground is far higher – something like three times as much. what this means is that much of these reserves will need to be left untapped. and the problem is that many businesses ’ valuations depend to a significant degree on the future anticipated value of such fossil fuel reserves. but if those reserves are out of bounds, as it were, they are effectively worthless, making them " stranded assets ". the loss in the value of these assets puts the companies ’ very survival on the line. as a case in point, the market capitalisation of the major us coal businesses has contracted by roughly 60 % over the past five years, and by around 90 % over the past ten. and that was against the backdrop of the us equity market as a whole racing from one record to the next. and that ’ s just one example of many i could mention. depending on how quickly and unexpectedly the transition and the resulting repricing process take place, they may well have a huge bearing on the stability of entire sectors of the economy. so it will mainly become an issue whenever businesses and investors are unable to plan for the long term because they need to be in a position to respond to short - term policy impulses. this poses the risk of cliff effects, which can trigger disruptions and financial losses that then affect the financial system and its stability. 3 climate risks in the german banking system let ’ s now jump straight from theory to practice. to what extent would german banks and savings banks be affected by a shift to a lower - emission economy? at first glance, the amounts lent by german institutions to sectors emitting especially high levels of co2 appear insignificant : loans of €1 million or more granted by german banks to coal mining companies currently amount to no more than just under €1 billion in total. however, loans to coal mining companies can make up 1 - 2 % of individual institutions ’ issued loans of