effects on systemic risk and growth, ” economic policy 31 ( 2016 ), 51 - 106. savings favours participation in capital markets7 and there is evidence that institutional investors have positive effects on corporate governance. 8 a look at the development of institutional investors in advanced economies highlights the challenges ahead. countries in continental europe continue to lag behind the uk and the us. the gap is all the more serious in the pension funds sector, reflecting the relative weight of funded retirement schemes in national social security systems. the gap is very noticeable in italy. for example, in 2015 the assets managed by pension funds accounted for less than 10 per cent of gdp in italy, compared with more than 100 per cent on average in the uk and the us. we definitely need to attain a more comprehensive understanding of the underdevelopment of institutional investors in most euro - area countries. for all of these reasons, policymakers look favourably at the development of market - based financing and the growth of institutional investors. it must be stressed, however, that banks and market - based finance remain complementary, rather than substituting one another, and that a level playing field should be ensured for all financial intermediaries. if regulatory changes put banks at a disadvantage, firms may end up having difficulties accessing both bank and non - bank forms of external finance. indeed, apart from remaining a vital source of corporate funding, especially for smes, banks are uniquely equipped to help firms to access the capital market. moreover, banks offer contracts ( such as overdrafts or credit lines ) and services ( such as lending assistance ) that are often complementary to market - based finance. these contracts and services can be helpful to firms, especially in periods of distress. 9 * * * to conclude, the corporate sector would greatly benefit from a more developed market - based segment within our financial systems. institutional investors play a pivotal role in this structural evolution. at the european scharfstain, d. s., “ presidential address : pension policy and the financial system, ” the journal of finance, 73 ( 2018 ), 1463 – 1512. mccahery j. a., z. sautner and l. t. starks, “ behind the scenes : the corporate governance preferences of institutional investors, ” the journal of finance, 71 ( 2016 ), 2905 – 2932. bolton, p., x. freixas, l. gambacorta and p. e. mistru

”. absent sizeable structural reforms, the main risk would be what the report calls an “ inflationfirst ” scenario, where a rise in inflation would eventually force central banks to increase monetary policy interest rates, which in turn would prevent an acceleration of economic activity. i fully support the report ’ s emphasis on the importance of structural reforms to place the global economy on a sound footing and to make markets work better. in fact, the crisis has clearly shown the limits of the self - regulatory capabilities of markets, particularly financial markets, and their consequences on financial and, ultimately, macroeconomic stability. i also agree with the report ’ s main policy advice, centred inter alia on investments in r & d and incentives for equity financing over debt. however, in order to ensure an orderly adjustment of the global economy and to allow structural reforms to rapidly kick - start the real economy, appropriate macroeconomic policies are also needed. in this vein, i do not share the report ’ s negative assessment of the current monetary policy stance that would be “ harming the prospects of a sustainable recovery ”. this view – which appears not in line with the one expressed in other recent oecd assessments and policy bis central bankers ’ speeches suggestions – seems to me to overlook the reasons behind the current monetary stance, while focusing too much on the possible unintended consequences. in a context of very low commodity prices and long - lasting weakness of both global and domestic demand, in advanced countries disinflationary pressures and slack in the economy are still high, although with differences among the main economies. under these circumstances, a wait - and - see approach to monetary policy would be unwarranted : rather, central banks observe economic developments, ponder risks and may need to act forcefully. the current low level of policy rates is the appropriate reaction to current cyclical conditions, not an arbitrary choice of central banks ; a less accommodative stance, particularly given the high debt levels as a consequence of the crisis, could lead to a deflationary spiral with severe consequences both for the real economy and the financial sector. this holds true in particular for the euro area, where unused productive capacity and labour are greater than in other advanced economies. estimates by banca d ’ italia staff ( which do not consider further possible non - linear effects ) show that in the absence of the measures adopted by the ecb governing council between june 2014 and december 2015, both annual inflation and gdp growth in the area would be