##4 just as much as us corporate bond spreads. it also triggers declines in euro area stock markets of a similar magnitude to the declines in us stock markets. 5 however, the financial spillovers from ecb monetary policy to us bond spreads, or to foreign equity markets, are found to be less impactful. this asymmetry in the international impact of us 1 / 6 bis central bankers'speeches monetary policy and euro area monetary policy is rooted in the dominant role of the us dollar in global financial markets. furthermore, our analysis6 shows that there are only limited spillovers from the monetary policy of the federal reserve to euro area inflation and output. this suggests that ecb monetary policy actions are, by and large, able to shield the euro area economy from spillovers from us monetary policy. but undoubtedly, there is evidence that us monetary policy is a driver of a “ global financial cycle ”. 7 in step with such a financial cycle the risks to euro area financial stability can change as well. current financial stability concerns in the euro area as you know, our characterisation of the main risks to euro area financial stability has remained broadly unchanged over the recent years. we see four main risks : the most prominent risk stems from the possibility of a disorderly increase of global risk premia. the second risk is related to renewed debt sustainability concerns, for sovereign debt in particular. the third risk is that banks ’ intermediation capacity may be hampered by their continued low profitability. finally, we are of the opinion that possible liquidity strains in the investment fund sector constitute a growing risk. all four risks are intertwined and would have, if they were to materialise, the potential to be mutually reinforcing. in 2018, a growing economy and improved banking sector resilience were important positive factors supporting financial stability. now, however, the assessment is affected by a weakening economic growth outlook for the euro area. in the latest ecb staff macroeconomic projections, expected real gdp growth was revised downwards, and the outlook continues to be viewed as tilted to the downside on account of persistent uncertainties related to geopolitical factors, the threat of protectionism and vulnerabilities in emerging markets. in my view, the deterioration in the growth outlook increases the risk of financial instability particularly via two main channels. first, low economic growth raises concerns about sovereign debt sustainability. and second, it further dampens profitability prospects for the banking sector. a weaker growth trajectory will challenge euro area sovereign

central banks more credible and independent are more likely to be adopted and sustained. 7 let me make it clear that i think that currency competition has been a much larger force in emergingmarket economies, in which the costs of poor policies have been demonstrated quite clearly, than in advanced economies. still, at least some degree of currency competition may be at work in the united states as well : one could argue that competition faced by the dollar, particularly abroad, is likely greater now than before the introduction of the euro because of the scale of euro - denominated financial markets and the financial institutions in the euro area, but i would not want to push that argument too far. the forces behind currency competition that have bolstered incentives for central banks to maintain low inflation and so have helped anchor inflation expectations are likely to persist and perhaps strengthen. the ease with which funds move across capital markets should continue to ensure that the responses to inflationary central bank policies will be swift and significant. the resulting incentives provided by currency competition should continue to foster relatively low far - forward nominal interest rates in many countries. as long as capital markets remain open and people remain aware of the costs of high inflation policies, i believe that the forces behind the low level of long - term interest rates and hence the general flatness of yield curves around the globe will tend to persist for some time. in a paper with douglas irwin, i documented a similar dynamic at work in the gradual reversal of protectionist policies in the united states in the 1930s and 1940s. see douglas a. irwin and randall s. kroszner ( 1999 ), " interests, institutions, and ideology in securing policy change : the republican conversion to trade liberalization after smoot - hawley, " journal of law and economics, vol. 42 ( october ), pp. 643 – 73.