the shocks that hit the euro area over the last two years would reduce inflation by at least 1 percentage point more than in a standard rational expectation model ( see figure 2 ). besides being a problem in its own right, this would also imply that the ( standard ) models central banks use for forecasting may become inaccurate and provide poor guidance for policy decisions. our research also shows that there is a concrete risk of an outright de - anchoring of inflation expectations ( cecchetti et al., 2015 ). as long as expectations are well anchored, changes in relative prices or supply shocks should affect the price level in the short - but not in the longrun. hence, the correlation between short - term and long - term expectations provides a gauge of de - anchoring risk. in the euro area this correlation has risen in recent months. in particular, the probability of downward changes in short - term expectations becoming associated with variations in longer - term expectations has increased substantially ( figure 3 ). technicalities aside, it is clear that even declines in inflation due to favourable supply shocks may have adverse consequences when nominal interest rates are at the zero lower bound and debt levels are high. 2 to cut a long story short, it is crucial that central banks keep pursuing their price stability target. 3. is monetary policy approaching its limits? ( no! ) the next question is whether central banks can achieve their goals when interest rates are at the zero lower bound. are their tools up to the task? this debate has intensified since the ecb governing council ’ s decision of last march, but it is hardly new : doubts about the effectiveness of monetary policy, as well as claims that it has now “ really ” reached its limit have been voiced after each round of monetary expansion in the last eight years on both sides of the atlantic. the effectiveness of monetary policy might be hindered because of the zlb ; because “ you cannot push on a string ” ; or because monetary stimulus is necessarily weaker after a financial crisis, when firms and households want to deleverage and the bank transmission channel is broken ( masciandaro, 2016 ). my initial response to this question is contained in the title of this speech : “ never say never ”. there are no obvious limits to what central banks can do. the suspicion that they might really run out of tools and ideas is understandable, but it is backward - looking and has proved groundless more than once already. my considered response is that we now have

axel a weber : growth prospects after the crisis speech by professor axel a weber, president of the deutsche bundesbank, at the 21st european business school ( ebs ) symposium, oestrich - winkel, 17 september 2010. * 1. * * introduction professor jahns, ladies and gentlemen, i am delighted to have been asked to assume the patronage of the 21st ebs symposium and thus to have the opportunity to speak to you today. occasions like this which provide a platform for students to meet professionals are an agreeable complement to academic study. this symposium has traditionally been organised by first - year students who, i must say, appear to have done very well in performing their task. 2. growth and the financial system – some general remarks the topic of this year ’ s symposium is “ growth – a future without boundaries ”. economic growth is widely associated or even equated with prosperity, and in light of the current crisis the topic is receiving a lot of attention : after all, the crisis not only resulted in the most pronounced downturn since world war ii, for many it also cast doubt on the path of economic activity once the crisis is over. nevertheless, if we wish to make a sound and comprehensive judgement it is not advisable to look only at current gross domestic product ( gdp ). economic growth is a concept that embraces a longer - term perspective and we would be well advised to look beyond the current crisis. the concept of potential output permits a calm and objective view of the matter. abstracting from cyclical fluctuations, it covers the medium to long - term trend of gdp and links it to the driving factors for such a time horizon. to be more specific and to focus our minds on the lasting economic impact of the crisis, it helps to take a simple textbook model of economic growth as a starting point. in this stylised model, growth is determined by three factors : capital, labour and technical progress. how are these three factors, in turn, affected by the financial system? the first factor – capital – points perhaps most obviously to the importance of the financial system. after all, the financial sector is not only a part of the economy with a distinct value added, it also plays a crucial role in capital accumulation. however, especially in highly developed economies that typically boast sizeable and sophisticated financial sectors, the role of the financial system goes far beyond that of mere capital accumulation. in such economies, the financial system plays a key role in