31. 082017 welcome address first annual research conference of the banco de espana luis m. linde governor buenos dias, good morning to everybody. let me welcome you all to the first annual research conference of the banco de espana. we plan to make this conference our main research event each year. so, we hope that today ’ s edition is the first of many to come. our aim is to bring together scholars and policymakers to express views and discuss on the key policy questions for central banking, both from an academic and a practical perspective. the conference reaffirms the banco de espana ’ s commitment to research as an indispensable tool for economic policy - making. good research strengthens the foundation of our policy framework and lays the groundwork for the models we use in our economic and monetary policy analysis. the banco de espana commits significant resources to research. let me give you some figures. currently, according to the ideas database, our bank ranks third in research among national central banks in the euro zone. in 2016, researchers at the bank published more than 30 working papers. indeed, research is not a matter of quantity, but of quality ; in the last few years our researchers have published in top journals such as econometrica, the american economic review, the journal of political economy, the various american economic journals and the journal of monetary economics, just to mention a few examples. over the last three years, fifteen young economists holding phds from renowned international universities have joined the bank ’ s staff. i am pretty confident that our research output will be improved and enhanced in the future. challenges for macroeconomic research today and tomorrow you will be talking essentially about macroeconomics. looking forward, macro policies, monetary, fiscal, and macroprudential policies, are facing a number of challenges that require deep theoretical and empirical analysis. perhaps, first of all, we need to understand the causes and consequences of the current levels of low inflation in most developed economies, despite the fact that most major central banks have introduced unprecedented monetary measures to support activity and growth. several explanations, ranging from a “ debt supercycle ” to a secular stagnation have been proposed. if natural rates at very low or even negative levels are here to stay, central bankers will have to rethink our standard toolbox and to decide which policy measures put in place during the last decade should be maintained. in this respect, i think that the first paper of the conference, which analyze

innovation and evolution in bond markets. i ’ ve hopefully given you a sense of how the bank is developing its approach, much in the same way that it has been evolving to the needs of the markets it operates in for the last 330 years. on the one hand we ’ re normalising our balance sheet, transitioning to a new normal that in terms of our participation will frame the environment for further innovation. and on the other, we ’ re actively working with the market to utilise the significant technological developments we ’ re seeing within the settlement infrastructure we operate. we are mindful that the shocks in recent years have shown that we cannot take stability for granted, and so one core principle underpinning all our work to innovate and evolve, as well as in terms of our direct participation in markets, is the objective to maintain monetary and financial stability for the good of the people of the united kingdom. i would like to thank johnny elliot, richard lewis, ed kent and rachita syal for their help in drafting this speech, as well as many other bank colleagues for their helpful comments and suggestions. 1. these data on balance sheet holdings are reported on an initial purchase proceeds basis, whereas the data displayed in chart 1 shows gilt holdings in market value terms. 2. bank underground ( 2019 ), ‘ the great war and the bank of england as market maker of last resort ’ 3. goodhart ( 2018 ), ‘ the bank of england, 1694 - 2017 ’ 4. kynaston ( 2017 ), ‘ till time ’ s last sand : a history of the bank of england 1694 - 2012 ’ 5. for further detail, see the bank of england ’ s quarterly bulletin article ‘ financial stability buy / sell tools : a gilt market case study ’ 6. for further detail, see andrew hauser ’ s speech ‘ ’ less is more ’ or ‘ less is a bore ’? re - calibrating the role of central bank reserves ’ 7. for further detail, see dave ramsden ’ s speech, ‘ quantitative tightening : the story so far ’ 8. the tfsme is a lending operation backed by collateral and is not indemnified by hmt. it is held on the bank ’ s balance sheet rather than in the apf. 9. the bank is also developing the liquidity tools it has for supporting financial stability. this includes building a new backstop facility capable of lending to non - bank financial institutions ( n