, sterling fell by a quarter. that should have given us a head start in crowding in net exports to replace the lost domestic demand. the performance of net exports has, however, been distinctly underwhelming, adding just 1½ percentage points to total growth since the start of the recession. that is not simply a reflection of the weakness in our export markets, as the weakness at home has depressed imports correspondingly. once one controls for the changes in activity at home and abroad, net exports still look weak. imports and exports of goods have, however, behaved pretty much as expected. for example, the decline in our share of the market for exports of goods appears to have been halted ( chart 2 ). the real disappointment has instead been in exports of services, where our market share – which had been rising strongly before the crisis – has flattened off, rather than accelerating. a large part of that reflects a decline in the demand for financial services globally as a result of the crisis, but that alone is not sufficient to explain the weakness. along with the surprising robustness of employment, the disappointing performance of net trade is yet another puzzling aspect of this particular downturn. one possibility is that the lags have see e. g. bean ( 2002 ) and king ( 2000, 2006 ). bis central bankers ’ speeches been elongated, perhaps because heightened uncertainty has inhibited the necessary investment to move into new markets. if that is the case, then net exports can be expected to perform better as recovery here and abroad proceeds. but another possibility is that the demand for, and supply of, exports have become less responsive to relative price signals, perhaps reflecting the nature of the goods and services we have a comparative advantage in. that would imply a less optimistic outlook. let me now venture further afield, to the euro area. the euro area is by far our largest trading partner – accounting for getting on for half our exports – and those direct links are supplemented by close financial ties between our domestic banking system and the continent. so it is hardly surprising that recent inflation reports have singled out developments in the euro area as a key risk to the uk outlook. although the euro area has been in rough current account balance since the introduction of the euro, there have of course been substantial intra - zonal imbalances. in the run up to the crisis, periphery countries ran persistent current account deficits financed in large part by borrowing from core countries, especially germany. as a result, the net

communicate. the committee has two instruments through which it can withdraw the stimulus, raising bank rate and selling assets. unlike some other central banks which need to create new instruments to drain excess reserves or alter the terms of existing facilities, the structure of the bank ’ s operating framework means these two instruments can be used at any time, in any order. and the strategy guiding our policy decisions will be unchanged – monetary policy will continue to be determined by the outlook for inflation relative to target. the most difficult decision will be to decide the timing of the withdrawal, but that is always the case. the aftermath of the financial crisis posed many questions for the theory and practice of monetary policy. one year on from reaching the effective lower bound of interest rates and starting a policy of quantitative easing, there is still much for academics and policy makers to learn. i hope today ’ s conference will mark another step in that collaboration. references andres, j, lopez - salido, d j and nelson, e ( 2004 ), “ tobin ’ s imperfect substitution in optimising general equilibrium ”, journal of money, credit and banking, vol. 36, no. 5, pages 665 – 90. bernanke, b s, reinhart, v r and sack, b p ( 2004 ), “ monetary policy alternatives at the zero bound : an empirical assessment ”, brookings papers on economic activity, issue 2, pages 1 – 78. brunnermeier, m k and pedersen, l h ( 2009 ), “ market liquidity and funding liquidity ”, review of financial studies, vol. 22 ( 6 ), pages 2201 – 38. duffie, d, garleanu, n and pedersen, l h ( 2007 ), “ valuation in over - the - counter markets ”, the review of financial studies, vol. 20. del negro, m, eggertsson, g, ferrero, a and kiyotaki, n ( 2009 ), “ the great escape? a quantitative evaluation of the fed ’ s non - standard policies ”, manuscript, federal reserve bank of new york and princeton university. eggertsson, g and woodford, m ( 2003 ), “ the zero bound on interest rates and optimal monetary policy ”, brookings papers on economic activity 1, 212 – 219. fisher, p ( 2010 ), “ the corporate sector and the bank of england ’ s asset purchases ”, association of corporate treasurers winter paper. gert