you is that there are occasions when euro area core inflation rises, rather than falls, following an exchange rate appreciation – which is entirely at odds with our traditional thinking on the pass - through. perhaps unsurprisingly, this is typically the case when the exchange rate appreciates in response to a favourable demand shock. the logic is as follows : as the economy operates above capacity, inflationary pressures emerge that are sufficient to fully offset the disinflationary effects coming from the exchange rate channel. the chart also shows that changes in the relative monetary policy stance have, on average, the expected impact on consumer prices : if euro area policy tightens, the exchange rate appreciates and inflation falls. in other words, there is no empirical evidence that the exchange rate channel of monetary policy is inactive. but its strength will critically depend on the overall state of the economy, and not on the type of policy measure, standard or non - standard. this is my answer to the second question and can best be seen by looking at two concrete examples. 4 / 14 bis central bankers'speeches the first one relates to the sharp depreciation of the euro in the run - up to the announcement of the app. as you can see on slide 4, a simple model - based analysis suggests that a large fraction of the decline in the euro ’ s external value reflected the worsening economic outlook, to which we ultimately reacted. it is likely that exporters to the euro area, faced with falling euro area demand, absorbed part of the exchange rate movement in their mark - ups to protect their market shares, thereby mitigating the upward pressure on prices stemming from a weaker currency. the second example relates to the current situation. slide 4 shows that there are three forces, of roughly equal strength, that help to explain the euro ’ s marked appreciation in recent months : improved euro area growth prospects, an exogenous component and a tightening in the relative monetary policy stance vis - a - vis the united states. 5 / 14 bis central bankers'speeches slide 5 illustrates the implications of this shock decomposition for the assessment of the exchange rate pass - through. the black line, which is the net effect, suggests relatively mild downward pressure on core inflation, much below what the rule of thumb would tend to suggest, despite the sizeable appreciation. the reason is simple. the current solid economic expansion in the euro area allows firms that export to the euro area to increase prices in their currency without losing market share,

vitor constancio : stijn van nieuwerburgh's contribution to macroeconomics and finance speech by mr vitor constancio, vice - president of the european central bank, at the ceremony marking the award of the german bernacer prize for promoting economic research in europe to stijn van nieuwerburgh, madrid, 16 december 2016. * * * i am delighted to be here today to celebrate with you the winner of the 2016 bernacer prize : stijn van nieuwerburgh, professor of finance at the new york university, stern school of business. stijn is an outstanding scholar, researching at the interface between macroeconomics and finance, with a focus on the interdependencies between the real economy, asset pricing and the real estate market. his widely cited studies have been published in the leading international academic journals. stijn ’ s intellectual endeavours have significantly broadened our understanding of various aspects of housing markets and financial stability, to name two examples. his research is of significant relevance to central bank policy. as i will show in a minute, some of stijn ’ s innovative research has become a fundamental part of the newly established field of macroprudential policy. macroprudential policy aims to safeguard the stability of the financial system as a whole by increasing its resilience and resisting the build - up of vulnerabilities that lead to systemic risk materialisation. since the mid - 1970s all episodes of banking crises in advanced economies, i. e., periods of systemic risk materialisation, were associated with housing busts that, of course, had costly implications for the macroeconomy. 1these housing busts were preceded by protracted periods of systemic risk build - up inherent in ebullient house price cycles or even more broadly defined financial cycles underpinning the importance of monitoring joint cycles comprising credit and house prices. 2 stijn van nieuwerburgh ’ s research has helped to bring such issues to the fore. to put his contributions into context, note that these issues played no special role in macroeconomic models until the turn of the century. the handbook of macroeconomics, published in 1999, contained no references to housing. 3 it was not entirely absent from macroeconomic research but rather had a marginal role within the models. it wasn ’ t until the housing boom in the first half of 2000 that housing became a focus of macroeconomic studies.