/ 6 bis - central bankers'speeches this cannot be viewed in isolation from what is happening in the rest of the world, as slower growth will be a problem in almost all advanced economies both this year and next. growth has slowed particularly sharply in the european union, which is the main theatre of activity for estonian companies. companies and households in europe are particularly exposed to the consequences of the war between ukraine and russia and the energy crisis, because europe is a net importer of energy and was highly dependent on cheap gas from russia but now has to cope with much higher energy costs. the opportunities for growth in estonia, which is an open economy in which exports play a large role, depend directly on demand in the markets for our exports. there are many other reasons as well though why the estonian economy is currently performing worse than those in other parts of europe. the estonian economy had recovered rapidly by the start of 2022. companies had managed to accumulate financial buffers after the sudden stop of the pandemic, and households had improved their standard of living, but this equally meant that there was a higher peak from which to descend. the overheating caused by higher consumption gave a further boost to rising inflation. russia's military aggression and its consequences also affected the estonian economy more than it did others on average. rising prices for energy passed through more quickly and to a larger extent to other prices because many electricity consumers in estonia used exchange - based price packages, and estonian households spend more on energy and fuel than those in other countries, while the estonian economy is also more energy - intensive than the average in europe. the price level in estonia was pushed even higher by the interruptions to supply chains, which particularly affected sectors that had earlier used cheap raw materials from russia. being the immediate neighbour of an aggressive country also poses risks to business in estonia that are reflected in the cost of capital and in, for example, the number of foreign tourists. the sharp rise in interest rates has affected borrowers in estonia more immediately, as the majority of loan contracts here have floating interest rates. and to cap it all, the position of estonia is made more difficult by our main export markets performing more poorly than the average, as the nordic economies are under pressure from weak demand at home and abroad and from rapidly rising borrowing costs and a steep drop in house building. just because there has been a setback in the economy, does not mean that a longer period of stagnation will necessarily follow. the economy is

potential to be a new way to hold money and make payments. while all of this innovation opens up possibilities to do things differently than the past, it also carries risks. just like listening to music, the " how " may change, but the " what " will remain the same. as we look ahead, it's important to remember that even as the technology changes, the role of the central bank has not. it is and will always be to supply money and liquidity to bring stability to the economy and financial system. therefore, it's critical that we understand how these transformations could affect the economy and the financial system, as well as monetary policy implementation and central bank balance sheets. in addition, we must think carefully about proper regulation to protect consumers and investors and ensure the stability and safety of the financial system. 1 so, what are some of the things that the new york fed should be thinking about? to start, digital transformation could have implications for markets and for our interactions with counterparties, as well as how we carry out monetary policy. like in the example of music, change is already underway. take the fed's overnight reverse repo ( on rrp ) facility, for example2. the on rrp facility has broadened the set of our counterparties and diversified the type of instruments on the liability side of our balance sheet. this facility has supported the control of short - term interest rates according to the fomc's policy direction. this has had profound effects on the composition of liabilities on our balance sheet. traditionally, the fed's liabilities have primarily been paper currency and reserves held by banks at the fed. for example, a decade ago, paper currency totaled $ 1. 1 trillion and bank reserves $ 1. 5 trillion. but since then, we've seen a dramatic change in the makeup of the liability side of our balance sheet. today, in addition to $ 2. 3 trillion of currency and $ 3. 3 trillion of bank reserves, there are $ 2 trillion in overnight reverse repos, representing funding from nonbank sources such as money market funds. turning to the future, the big question is what a world of digital currencies like stablecoins and cbdcs would mean for the implementation of monetary policy. how will central banks anticipate and adapt to the changing landscape brought on by the possibility of digital currencies? there is much more to discuss about these important considerations in a fast - changing world