have seen that unconventional measures are effective in terms of arresting disinflation, preventing fears of a slide into deflation and supporting aggregate demand. but it is fair to say that we need to understand more about their transmission in order to see whether qe can be retained as an instrument that, if not conventional, can play a valuable and reliable role in the toolbox to which central banks can make recourse. remark 3 : zlb and non - conventional policies pose extra challenges vis - a - vis normalisation. looking ahead, when the monetary policy tightening cycle eventually commences, it is very likely to be different and more challenging than in previous cycles. just try to picture the recent history of policy rates for some major central banks in a chart. that chart would look odd on both the y - axis and the x - axis : in some major economies, zero has featured for longer than any other value of the policy rate before. this makes some of us think that the nonlinearity imparted by the lower bound and generally thought to apply to the policy rate on the way down may exert, for different reasons, an impact also on the way out of the lower bound. the economy may have just gotten too used to that number. for one thing, rate increases will have to be carefully aligned with the normalisation of central bank balance sheets. there will be some division of tasks between instruments to be thought through and organised : what portion of accommodation can be removed – quite conventionally – by raising shortterm rates, and what portion by active management of portfolios, i. e. by applying controlled pressure on long - term rates. the profile and evolution of short - term rates and the shape of the term structure will probably look different than in previous normalisation cycles. the ecb is a long way from these challenges, but other central banks are confronting these as i speak. b. euro - area specific remarks in respect of the euro area, these general remarks require some modification. for brevity, let me focus on two aspects. remark 4 : the ecb hit the lower bound later than many other central banks, and when it did it was not the zero lower bound, but a negative lower bound. similarly, it resorted at a late stage to large - scale asset purchases. it stands out that the ecb ’ s monetary policy became distinctly unconventional at an early stage – not least with the adoption of fixed - rate full allotment tenders in

as a substitute for quantitative interventions. bringing the overnight interest rate to a negative level already in june last year de facto meant that we started generating effects – to a certain degree – that one expects to see under quantitative policies. second, the negative rate policy complements the channels through which the app operates. a negative rate on bank reserves is an inducement for banks to lend money balances on and to avoid the tax that would otherwise be paid on them. this should lead to an increase in the velocity of circulation of cash reserves, which is another way to trigger an acceleration in the portfolio rebalancing effect that is a key component in the transmission of asset purchases to the real economy. remark 5 : going forward, the effectiveness of monetary policy will improve with a more complete european monetary union. has the just described special sequencing of the ecb ’ s unconventional monetary policy measures been appropriate? to answer this question, we should recall that the euro area has its own distinct characteristics. and, as a currency union, it is in many ways incomplete. in the language of the “ five presidents ’ report ”, “ europe ’ s economic and monetary union ( emu ) today is like a house that was built over decades but only partially finished. it is now high time to reinforce its foundations and turn it into what emu was meant to be ”. this diagnosis explains why, looking back, measures of first resort in other jurisdictions have been measures of last resort in the euro area. in particular, it is clear that, in the euro area, central bank purchases of sovereign debt raise additional questions which are quasi - nonissues in consolidated nation states. and, going forward, this diagnosis also makes it clear why the euro area faces extra challenges. we have to find the right balance in what markus brunnermeier recently described as the “ stimulus versus reform debate ” at the european economic association conference in mannheim. 7 as i said on the same occasion, in a similar spirit, we need to bring together two different macroeconomic traditions. • the “ macroeconomic ” tradition, by which i pretty much mean the british and “ saltwater american ” tradition of macroeconomics, with its solid emphasis on demand management. it correctly identifies the need to provide stimulus but may have a tendency to overlook incentives and institutions. here, a focus on “ demand see my speech on price stability : a sinking will - o ’ - the - wisp? at the imf spring meetings seminar, washington,