##back effects. this will help to maintain the financial conditions necessary for us to achieve our price stability objective. unconventional monetary policy and international capital flows let me start by briefly recalling the empirical evidence on the impact of the ecb ’ s policies on cross - border capital flows. my first slide illustrates this impact quite clearly for the euro area. 1 / 7 bis central bankers'speeches there was a striking turnaround in capital flows, from net inflows to net outflows, that started in mid - 2014, just when we had announced our credit easing package and when expectations were gradually building among market participants that we would also begin purchasing government bonds. at their peak in the spring of 2016, net capital outflows – measured here in terms of 12 - month moving sums – reached nearly 5 % of euro area gdp. never before in the history of the euro area have capital flows been so high. you can also see that virtually all net capital outflows have been concentrated in purchases of foreign long - term debt securities. that is, large - scale purchases of sovereign bonds by the ecb encouraged many investors to rebalance their portfolios towards the closest substitute – bonds issued by other sovereigns. 3 these capital outflows are likely to have added to downward pressure on global bond yields. 4 for quantitative evidence, see cœure, b. ( 2017 ), “ monetary policy, exchange rates and capital flows ”, speech at the 18 jacques polak annual research conference hosted by the international monetary fund, washington, 3 november. on the right - hand side you can see that the start of the app, and prior expectations thereof, coincided with a measurable decline not only in euro area overnight index swap term premia but also in term premia in the united states. put simply, increased demand for foreign securities increased their prices and thereby lowered their yield. the question, then, is whether the approaching end of net asset purchases in the euro area might see a sudden waning in the support for global bond yields, and thereby risk amplifying 2 / 7 bis central bankers'speeches prevailing upward pressure on global sovereign bond yields stemming from the ongoing tightening by the us federal reserve. if such adjustments were abrupt, they could risk causing broader capital reallocations, including from emerging market economies, and force a revaluation of global equity prices, with potentially adverse impacts on the financial conditions consistent with our primary mandate. the gradual decline in net capital outflows since their peak

scope, if the necessity is there. if the price of oil does not continue to go down ( it cannot go down indefinitely ), we will see a jump in inflation in the last quarter of this year. but we may have before that some months of negative inflation. until now we have not seen a reason to doubt that the programme will work. the staff projections are recent, predicated on the completion of the whole programme and foresee inflation at 1. 7 % by 2017. but we are prepared for any contingency. what can monetary policy do for growth and potential growth? monetary policy affects growth via financial conditions, which affect expenditure decisions, investment and the aggregate demand. what is more difficult for monetary policy is to affect potential growth. that depends very much on the growth of labour supply, technological progress, increasing productivity, organization of production. that ’ s the supply side. the effects of monetary policy on that are very indirect. europe has a big problem of low potential bis central bankers ’ speeches growth. it starts with demography : the working population is decreasing, so productivity has to be increased even more to compensate for it. potential growth is very low and in present conditions, we fear that this will be a protracted period of low growth. this prospect of protracted low growth is shared by all advanced economies. so europe has to do more in terms of supply side reforms, investment, productivity growth to get out of this situation. is embracing immigration important for europe? in general yes. but there are two dimensions to this : one is the medium to long term issue of immigration and demographic developments, and the other is the short term crisis of refugees that raises a lot of logistical issues, among others. to me, it ’ s clear that immigration is one of the things that can improve the demographic potential of europe, which is necessary, if europeans think and care about the welfare of future generations. the size of the working age population of the euro area is declining 0. 6 percent a year until the 2030s. that ’ s huge. to change the demographic trends, promoting birth is not enough, is also has to be done through immigration, if this is to be corrected. if not, we ’ re creating a great difficulty to growth and to the welfare of future generations. this is a very acute problem because for years europe has been doing the sort of collective demographic suicide and no one is thinking about this. in the short term, the backlash against immigration has been dramatic