policy implies that the ecb will maintain a large portfolio of assets on its balance sheet for a pronounced period of time. alongside low policy rates this will ensure that financial conditions will remain accommodative even when the net asset purchases have been reduced to zero. this way monetary policy will continue to support the economy and a gradual increase of inflation to levels consistent with our aim over the medium - term. second, some have looked at the recent appreciation of the exchange rate of the euro as a source of concern. and indeed, excessive exchange rate volatility and overshooting can be detrimental to economic growth and price stability. however, it is often overlooked that exchange rates move endogenously in response to changes in the economic outlook and market sentiment. for example, the recent appreciation of the euro area reflects to an important extent a more benign assessment of the economic outlook vis - a - vis the rest of the world. and safe - haven capital inflows have also increased in response to increased political uncertainty in other major economies. through this lens, the appreciation of the euro should be considered a reflection of the relative strength and stability of the euro area economy. a clear indicator of the factors that underlie the reduced necessity of continued asset purchases that i have outlined earlier. all supporting the call for a gradual but decisive rebalancing away from non - standard towards traditional instruments of monetary policy. tilting the broader policy mix thus, monetary policy has played and will continue to play its part in helping to keep the economy at solid footing. by itself, however, monetary policy is not enough to achieve and maintain sustainable economic growth. indeed, structural factors play a key role in the low prospects for growth. calling for yet another reorientation of macroeconomic policies. let me explain this in more detail in the remainder of this talk. many countries have failed to adapt to the changing environment in recent decades, most importantly in terms of technological progress and globalisation. in addition, the monetary union removed the exchange rate as an adjustment mechanism for member states. by 1999 it was clear that several member states needed structural reforms to strengthen alternative adjustment mechanisms, like wage and price flexibility. in practise, however, structural differences between emu countries have not lessened, unlike in the rest of the eu. the lack of structural convergence has had important real effects. since 1999, income differences between the initial emu member states have not been reduced. the structural nature of the disappointing growth in the emu calls

depend exclusively on your own actions but on how far others trust you. trust, in turn, is defined as a person ’ s belief or expectation that another person or institution will act in favor of one ’ s well - being ( oecd, 2017 ). so we could think of credibility as an institutional asset that depends on the factors that influence trust from stakeholders and the public. credibility in a central bank refers to public ’ s belief that future actions of monetary policy that are optimal today will be carried out even if they no longer seem optimal in the future. this is related to public trust, but the two concepts are not quite the same. one can imagine the public having trust in the central bank and at the same time the latter adopting a discretionary monetary policy strategy to retain full flexibility regardless of past promises. however, it is hard to imagine the opposite situation of a central bank fully engaged in the management of expectations without trust from the public. 1 this also applies to communication. we can discuss alternative strategies to make sure that the message issued by a central bank is adequately understood and internalized. however, there is little that a good communication strategy can do if the public does not trust the central bank. 2 christelis et al. ( 2016 ) have formally explored this for the europe using micro data, finding that higher trust in the ecb lowers inflation expectations on average, and significantly reduces uncertainty about future inflation, even after controlling for people ’ s knowledge about the objectives of the ecb. similarly, mellina and schmidt ( 2018 ) find that having greater trust increases the probability of expecting unchanged prices and decreases the likelihood of expecting either slightly or sharply rising prices over the medium term. through behavioral insights, bholat et al. ( 2018 ) show that public ’ s trust in the bank of england can be further improved by enhancing the communication with the public, particularly at times when trust in public institutions has fallen and responsibilities delegated to central banks have increased. page 3 of 8 central bank of chile july 2019 approaching institutional credibility from stakeholders ’ trust has a number of conceptual and operational advantages. first, there is a large body of research assessing its value : trust is at the heart of societies and a major component of social capital. a number of studies have related interpersonal and institutional trust to lower transaction costs, social cohesion and wellbeing. second, trust is a livelier concept, which can respond to information and experience acquired by stakeholders, as compared to the more static notion