, about €1 trillion ( or 30 per cent ) below the peak reached in june 2012. during the same period, the balance sheets of the federal reserve and of the bank of england had expanded by around 60 and 10 per cent, respectively. 7. a forceful and unprecedented monetary policy response therefore became warranted : it was important to preserve the credibility of our actions and underpin expectations. at the beginning of 2015 the governing council decided to extend its programme of asset purchases to public sector securities. under this new expanded asset purchase programme ( app ) the eurosystem is making monthly purchases amounting to €60 billion. as explicitly stated, the programme is scheduled to continue at least until the end of september 2016, and in any event until we will observe a sustained adjustment in the path of inflation consistent with a return to price stability. 8. the choice of this particular measure was driven by the consideration that outright asset purchases allow a more direct control of the size of the increase in our balance sheet, and hence of the monetary stimulus itself. the decision to purchase government securities reflected the need to focus on assets available in quantities sufficient to ensure an adequate degree of monetary accommodation and whose returns are able to influence the conditions of the real economy. 9. the app is a new programme for the euro area, but it is not a revolution in monetary policy making in general. central banks around the world have relied on large - scale asset purchase programmes to further stimulate the economy and fulfil their mandates after hitting the zero lower bound. such measures were taken, as we all know, by the bank of japan, the first time in 2001, and by the federal reserve and the bank of england, following the global financial crisis in 2008. it seems to me that i. fisher, “ the debt - deflation theory of great depressions ”, econometrica, 1, 4, 1933. m. casiraghi and g. ferrero, “ is deflation good or bad? just mind the inflation gap ”, banca d ’ italia, questioni di economia e finanza ( occasional papers ), 268, 2015 ; c. borio, m. erdem, a. filardo and b. hofmann, “ the costs of deflations : a historical perspective ”, bis quarterly review, march 2015. s. neri and a. notarpietro, “ inflation, debt and the zero lower bound ”, banca d ’ italia

- led growth model to a consumption - led model. combined with the previous bouts of leveraged expansion, china now has a number of sectors that suffer from the twin ailments of overcapacity and high leverage. bad loans in the banking system are likely to grow over current levels – stressed loans are estimated to be around 5. 5 % of the bank loan book today. in addition, there may be serious weaknesses in the shadow banking system, which could feed back to banks. clearly, cleaning up the financial system will be a challenging but necessary task. work at the imf suggests that a 1 - percent permanent negative shock to china gdp caused by one - off 1 - percentage decline in its real gdp growth will knock off 0. 23 percentage points from global growth in the short - run 3. a key question is whether we in saarc region are at significantly more risk than others. the answer probably is no because none of us is primarily commodity exporter to china, but it cannot be an unqualified one. trade could be impacted due to second round effects – we export to those who traditionally export to china and have thus slowed down – and due to similarity in trade patterns with china – we compete with those who now have excess production capacity. on the financial side, exposure to china is large for the asia - pacific banks, especially for banks from hong kong, singapore and australia and much less for banks from our region. however, some of our countries, though not india, have significant borrowing from chinese banks, and these borrowings could become costlier if chinese banks turn inwards. moreover, financial market losses in china can heighten the risk premia that industrial country investors will charge for investing in our region, and the result could be capital outflows of the kind that were seen last august and early this year. chinese growth will depend not just on its policies, but on growth elsewhere in the world. there appears to be a general consensus that global growth has been too slow for too long. the imf downgraded its outlook for global growth in 2016 and 2017 by 0. 2 and 0. 1 percentage points, respectively. it is true that downside risks and uncertainties to the global outlook are large in the backdrop of event risks i have alluded to. however, a more careful look at the data suggests some care in jumping to the conclusion that growth has been slow. global growth has averaged 3. 5 per cent since 1980 and, in