participants, but the systemic risk which can be associated with them must be considered from every angle. obviously it would be counterproductive if tighter regulations had the effect of pushing regulated finance into the unregulated area. this is a major topic which is being examined right now at the request of the entire international community, particularly at the level of the financial stability board. i think i am expressing the feelings of all central bankers when i consider that there are crucial issues here in terms of transparency and appropriate regulation. we must be sure that these financial market participants do not create new systemic risks. are you satisfied with the rise of the organised markets compared with over - thecounter ( otc ) transactions, with specific reference to centralised compensation? bis central bankers ’ speeches – here again, we are dealing with another core issue on which the entire international community is reflecting. the act of pushing activities which are very broadly disorganised towards clearing houses, towards organised markets, is a formidable undertaking. of course, there will always be otc contracts, but we have a major interest, in terms of regulation, financial stability and the removal of as much systemic risk as possible, in ensuring that these contracts, these derivative instruments, become as standardised as possible and can be traded through organised markets. in more macroeconomic terms, how do you judge the actions of the g20 aimed at reducing global imbalances? – the reasons for the crisis and the responsibilities are manifold, because there were multiple failures. it is unnecessary to dwell on finding a single scapegoat. however, one of the causes was certainly the prevailing complacency over a long period about very large international imbalances. one of the main lessons from the crisis is the need to have the right kind of coordination of macroeconomic policies, which is the international community ’ s responsibility. we have created integrated global finance and a globalised economy : there is a need to strengthen very considerably the governance of these. the international monetary fund is playing a leading role here by providing significant conceptual support for this strategy of the g20 and the entire international community. we have a lot of progress to make in this area as well. everyone is well aware of the dangers associated with these major imbalances – surpluses on the one hand, deficits on the other – in a full - blown crisis. then, as we emerge from it, as is the case, with a perceptible upturn that is

offset a tightening in financial conditions is then highly effective. slide 5 monetary policy most effective in stressed conditions, deposit rates often floored at 0 % https : / / www. ecb. europa. eu / press / key / date / 2020 / html / ecb. sp201124 ~ bcaebee7c0. en. html 4 / 13 24 / 11 / 2020 covid - 19 and monetary policy : reinforcing prevailing challenges but empirical evidence also suggests that the marginal effects of financial conditions on output and inflation become less clear when the economy is recovering or expanding. it is likely that this state - contingent effectiveness of monetary policy is also at play in current times. although recent news on the effectiveness of vaccines provides light at the end of the tunnel, significant uncertainty about future income prospects can be expected to prevail for some time, also because the pace of the rollout of vaccines and their acceptance among the public remain uncertain. heightened uncertainty, in turn, is likely to weaken the willingness and ability of firms and households to take full advantage of historically loose financial conditions. in these situations, monetary policy cannot unfold its full potential. fiscal expansion is then indispensable in order to sustain demand and mitigate the long - term costs of the crisis. the debate on the appropriate policy mix, however, predates the pandemic. in the years after the global financial and euro area sovereign debt crises, there has been a broad debate about the appropriate policy response to lift the euro area economy out of its low - growth, low - inflation trap. an important question in this debate is whether and how monetary policy transmission changes in the vicinity of the effective lower bound, and how this might affect the interaction between monetary and fiscal policy also outside crisis times. this question goes to the very heart of monetary policymaking. to see this, it is useful to recall the canonical new keynesian model that most central banks use to inform their decisions. at the core of these models is the euler equation, or the is curve, which provides two fundamental hypotheses on which policy transmission is built. the first is the “ interest rate hypothesis ” – the belief that aggregate demand reacts linearly to changes in real interest rates. the second is the “ expectations hypothesis ” – the belief that expected real interest rates matter and that changes in inflation expectations have real effects. these two cornerstones have long been taken for granted. but they are now under increasing scrutiny. https : /