issues we need to address as regulators. thinking outside the box as a researcher is often a response to the problems we face as regulators. i am sure that the discussion fostered by this eba policy workshop will provide a valuable contribution to our work, and i thank you all for your attention. see basel committee on banking supervision, ‘ global systemically important banks : revised assessment methodology and the higher loss absorbency requirement ‘, 2018. the slides for the paper presented during the 2024 eba policy research workshop are available here. see c. scotti, welcome address at the 4th banca d ’ italia, bocconi university and cepr conference on ‘ financial stability and regulation ’, 2024. designed by the printing and publishing division of the bank of italy

benign in the period ahead than during the pre - pandemic period. the fiscal and monetary dimension of the response to pandemic and war three factors are likely to have determined the fiscal and monetary response of different countries to the pandemic : i ) fiscal and monetary space at the outset, ii ) the severity of the outbreak and iii ) structural factors that affected the economic impact of the outbreak and restrictions imposed to contain it. on the first two accounts, iceland was in a relatively good position. modest public debt gave the government significant fiscal space, and the outbreak and restrictive measures were moderate. the structure of the economy, on the other hand, with tourism - related services being the largest sector, created a large potential demand for fiscal accommodation to compensate affected firms and households, as discussed above. as in other countries, both fiscal and monetary policy were applied to respond to the pandemic with substantial easing, and the size of the fiscal measures taken were close to the average in oecd countries. fiscal measures in response to the pandemic iceland ’ s monetary space was also substantial, with domestic interest rates being significantly above zero at the outset of the pandemic. however, the size of iceland ’ s monetary space should not be overestimated. the combination of relatively illiquid currency markets, fairly strong exchange rate pass - through to prices and a long history of monetary instability limit how much the interest rate differential visa - vis abroad can narrow without a risk to inflation. nevertheless, the central bank of iceland ’ s policy rate was reduced to a historical low, greatly softening the blow to the domestic economy, especially the construction sector. as it turned out, the economy recovered very strongly as covid restrictions were lifted and the central bank needed to withdraw the monetary stimulus and start raising interest rates earlier and at a faster pace than most advanced countries. from accommodative to tightening policy reversing the stance of fiscal policy has been a more gradual process. as temporary support measures have expired, the fiscal stimulus has gradually petered out and, with the economy expanding faster than previously forecast, public finances have also recovered faster than expected. the accelerated pace of the economy provides an opportunity to reach a structurally adjusted fiscal balance at an earlier stage than expected. however, although the current fiscal policy framework may be relatively transparent and predictable, it does not seem to provide a sufficiently strong incentive to take advantage of unexpected fiscal windfalls in a counter - cyclical fashion. consequently, monetary