cycle and regain monetary independence, provided that they show clarity in purpose and resolve in implementation. for emerging markets and smaller advanced economies, there is also evidence that while the global financial cycle has indeed been a dominant factor for the last two decades, the arrangement of open macro policies such as the exchange rate regime and financial openness still have direct influence on sensitivity to the financial cycle 2. explaining the difference in this respect between large advanced economies and emes would take us far beyond today ’ s discussion. let me only suggest that the existence of deep, diversified local currency denominated capital markets makes a crucial difference to help decouple from the global financial cycle. this incidentally suggests that capital market union as it is currently planned in europe, on top of its allocative benefits, can help strengthen our economic and monetary independence. the global exchange rate adjustments should be therefore seen as a natural by - product of such move towards monetary policy independence and divergence. while the exchange rate is not a policy target for the ecb, it is nonetheless important for growth and price stability. also, the exchange rate movements we have seen over the past few months are not unprecedented relative to the experiences of other major central banks with regards to announcements of quantitative easing policies ( such as qe2 and qe3 in the united states and qqe in japan, as well as the bank of england ’ s apf ). 3 this notwithstanding, global policymakers need to be mindful that global monetary policy divergence can also lead to some tensions that are due to global monetary policy spillovers. many discussions in the context of global monetary divergence have centred on the issue of monetary policy spillovers and the exposure of emerging market economies to volatile capital flows. yet, as i have argued elsewhere 4, there is no broad international consensus on the size and persistence of such spillovers. 5 more generally, there is little evidence that capital flows to emerging markets have been excessively volatile over most recent years, contrary to what is often claimed. they have been strong since the global financial crisis, decreased somewhat see aizenman, j., chinn m. and ito. h, ( 2015 ) “ monetary policy spillovers and the trilemma in the new normal : periphery country sensitivity to core country conditions ”, nber working paper no. 21128, april 2015. qe 1 which was implemented at the height of the financial crisis was followed by a sharp appreciation of the us dollar. similarly,

aggregates about the inflation outlook and the associated risks. this information has proven relevant and has made a decisive contribution to monetary policy decisions. there is, however, more work to be done towards deepening and refining our monetary analysis. this will involve not only improving the pertinent analytical tools and examining more thoroughly developments in the components and counterparts of money, but also a more comprehensive use of the signals contained in money data to extract information on the current state of the economy, and which can be useful for forecasting inflation : money and credit aggregates can play an important role in providing timely information about variables which are measured with a lag, and about variables that are not observable, or shocks hitting the economy that may be correlated with monetary developments. some work that has been done in this area is very promising. the general aim of this research agenda is to get more value from money. at the same time, we will also enhance the tools employed in our economic analysis by introducing a new euro area - wide model ( a state - of - the - art dynamic stochastic general equilibrium model of the euro area economy ), which is based on more solid microfoundations, in line with the latest theoretical advances. this model has the potential to incorporate in a substantive way the role and effects of money and credit in the monetary transmission mechanism. perhaps, in the future, we will be in a position to develop and reliably estimate a single empirical approximation of a general theoretical framework in which money is of central importance. when this is done, it may be possible to merge the two pillars of our analysis into a single one. but this will be a larger pillar in which money will continue to play a prominent role in guiding our monetary policy decision - making. v. money and financial stability a final issue that i would like to briefly address concerns the role of money and credit – the usefulness of monitoring and assessing monetary and credit developments – in the performance of another major central bank task, namely the safeguarding of financial stability. this issue is important in its own right, but it is also linked to the conduct of monetary policy, since price stability and financial stability are intertwined and should be mutually reinforcing. in recent years, extensive work has been undertaken at the bis, the ecb and elsewhere that demonstrates that excessive monetary and credit growth can provide useful early signals concerning the potential emergence of asset price bubbles, and that excessive liquidity growth has been associated with asset price