recent recommendations of the network provide a good basis for climate action by all central banks globally. lastly, in order to limit global warming to 1. 5 degrees, we need urgent measures. as noted earlier, we have known most if not all the pieces of this puzzle for at least 30 years. in the next 30 years, we must solve the puzzle. not solving it would be an epic fail, really failing future generations. ladies and gentlemen, dear friends, let me now invite onto the stage lord nicholas stern, who will give us his insights on the policies needed to achieve a sustainable future. nicholas stern is currently professor of economics and government at the london school of economics, and he has received several awards for his ground - breaking work on economics and climate change. in 2015, nicholas stern published a book entitled why are we waiting? it looked at the progress since the stern review and found it had been too slow. financial crises had led to some wavering in the wealthier countries. despite this, the book provides a cautiously optimistic take. this is based on the idea that we still have many routes open. we have not painted ourselves into a corner and we can still choose the right way forward. without further ado, lord stern, the floor is yours. and once more, welcome everybody! 1 www. econstatement. org / 2 the document can be found here : tem. fi / en / energy - and - climate - strategy - 2016 3 / 3 bis central bankers'speeches

the global financial crisis, compared to an average 0. 7 % during the eight years prior. a key driver of the surge in cross - border capital flows has been the prolonged period of nearzero interest rates and highly expansionary monetary policies in the advanced economies. there is empirical evidence that quantitative easing policies in the us have made capital flows to emes more procyclical [ 2 ]. second, capital flows have become more volatile. volatility almost doubled in the three years post - global financial crisis compared to the three years preceding the crisis. [ 3 ] volatility has since remained elevated. third, large and volatile capital flows can create some serious trouble for emes. what flows in can flow out as easily, and such reversals can be disruptive for eme financial markets which are typically not deep enough to smoothly intermediate the flows. capital flows can induce exchange rate fluctuations that are disconnected from macroeconomic fundamentals. there is growing empirical evidence that capital flows to emes have grown in importance as a driver of exchange rate movements. [ 4 ] in particular, capital flows can cause cyclical deviations to exchange rates beyond movements driven by the current account of the balance of payments. in the face of large and volatile capital flows, a freely floating exchange rate can become a shock amplifier rather than a shock absorber. capital flows can trigger financial stresses or exacerbate domestic financial vulnerabilities. strong capital inflows risk fuelling domestic credit and asset price bubbles, heightening risks to macro - financial stability in emes. a recent mas study found that a 1 % appreciation of the us dollar is associated with net capital outflows of 0. 3 % of gdp for emes in the following quarter. fourth, large and volatile capital flows are here to stay. ageing populations and slower productivity growth in the advanced economies suggest that the natural rate of interest, r - star, is likely to remain low, making the search for yield and resultant capital flows persistent rather than episodic. whose problem is it? in setting monetary policies, should advanced economies take into account the spillover [UNK] on emes through capital flows? it is neither feasible nor desirable for advanced economies ’ monetary policies to be constrained by considerations of the cross - border spillovers they generate. advanced economy central banks have their own domestic macro stability goals they need to meet and cannot be expected to sub - optimise their policy outcomes. moreover, accommodative monetary policies