banca d ’ italia and suerf workshop ‘ the effectiveness of monetary policy in a low interest rate environment ’ welcome address by daniele franco senior deputy governor of the bank of italy rome, 18 november 2020 i am happy to welcome you all to the banca d ’ italia and suerf ’ s joint workshop on ‘ the effectiveness of monetary policy in a low interest rate environment ’. as you may know, we had scheduled this workshop to take place in june, but we had to postpone it, because of the pandemic. we also had to move to a virtual setting and rely on video connections. the workshop addresses issues that are now at the top of policymakers ’ agendas around the world. the pandemic has led to the worst recession in recent history, and the scars that it will leave on the global economy are likely to prolong the low interest rate environment. monetary policy is playing a key role in supporting the recovery and its contribution will remain fundamental in the coming years. the discussion on strategies, targets and tools remains open. today and tomorrow, we will have the opportunity to embark on a wide - ranging debate on the challenges ahead. in my remarks today, i will touch upon a few of them. to begin with, i think we can all agree that the pandemic crisis has further exacerbated the effects of some ongoing long - term trends. some of these trends have already been in place since the great financial crisis and its aftermath. i am mostly referring to the drop in the natural rate of interest1 and to the subdued inflation dynamics. these trends are due to structural changes in macroeconomic relationships and imply a need both to reassess theoretical frameworks and to review the monetary policy strategy and tools. in this respect, the first session deals with monetary policy strategy in such a low interest rate environment. this of course calls into question the issue of the appropriateness of the current inflation target, which is indeed one of the main items on the table in see ex multis neri, s. and gerali, a. ( 2019 ), ‘ natural rates across the atlantic ’, journal of macroeconomics, 62. the eurosystem ’ s monetary policy strategy review. i will not comment further on the strategy review, since it is still ongoing. another important theme in the “ post - pandemic ” environment will be the interaction between fiscal and monetary policy. as we know, fiscal policy worldwide was boldly expansionary

mario draghi : challenges of surveillance and coordination introductory comments by mr mario draghi, governor of the bank of italy and chairman of the financial stability board, at the vith international symposium of the banque de france on “ which regulation for global imbalances? ”, paris, 4 march 2011. * * * the recent crisis has greatly raised our awareness of two processes that have been shaping the world economy : first, the growing interconnections between economies, that make the global system vulnerable even to local shocks ; second, the move towards a multi - polar setting in which no single dominant politico - economic power exists and new subjects, such as the fast - growing emerging economies, are coming to the fore. both processes are a reflection of fundamentally benign developments, such as free trade, free capital movements and the spreading of technological innovation which have brought enormous benefits to the world economy. however, as the crisis has forcefully shown, the potential for inherent instability is greater ; and the damage that may result from this instability is too large to ignore. in the past decades, after the end of the bretton woods regime, weak forms of policy cooperation prevailed. in terms of the international monetary arrangements in place, it was a “ non - system ”. for a long time, stronger forms of international policy coordination were deemed unnecessary : many theoretical and empirical analyses in the 1980s converged to show that any gains from such macroeconomic coordination were likely to be of modest size. however, we may now need to revisit that fairly sceptical conclusion. in the new global environment, policies ( and policy errors ) in individual economies can have substantial spillover effects. moreover, the costs of uncoordinated policies may increase in a non - linear fashion if those policies lead to large systemic breakdowns. in my view there is one main, simple lesson we should take from the crisis : if we want to preserve the gains brought by open, competitive markets on a global scale, we need stricter and more effective international cooperation. the common response to the crisis was a quantum leap forward in international economic relations. with a coordinated, prompt and synchronous set of policy measures we managed to avoid the worst consequences for the global financial system and the world economy. as the situation improves, it would be naive to think that we can now go back to the previous loose coordination. there continue to persist underlying “ fault lines ” ( to use the words of raghuram rajan ) that