euro, the region ’ s ) equilibrium real exchange rate and real interest rate. but looking at exactly the same phenomenon in another way, those who seek international currency status should not forget that an appreciating currency — and one that is very often a safe haven in times of economic and political crisis — implies a reduction in competitiveness and a drag on economic growth through a declining current account balance. as the international role of the euro increases, the demand for euros will increase — both directly as currency and indirectly via euro - denominated assets — potentially leading to an appreciation of the euro. i say potentially because we all know that the price of anything, including the euro, is affected by supply as well as demand. and the euro will encourage an increase in both the issuance of eurodenominated liabilities as well as in the demand for euro - denominated assets. as a result, there is some uncertainty about the effect of portfolio decisions on the price of the euro. even if the euro appreciates, this consideration suggests, the magnitude of the appreciation may not be very large. but let us nevertheless explore the implications of a net increase in the demand for euros and hence an appreciation of the euro over time, given that this is the result many have emphasized and one with particularly important implications for the international financial system. the effect of a large reallocation of portfolios away from the dollar and dollar - denominated assets and into the euro and euro - denominated assets would, by definition, imply a swing from current account surplus to deficit for the euro area as investors acquire net claims on the region. indeed, the appreciation of the euro would be the cause of the euro - area ’ s move from surplus to deficit. but such an appreciation of the euro would bring a reduction in competitiveness that could provide additional pressure for structural reform in continental european product and labor markets. and the counterpart to this from our side would be a reduction in net claims on the united states, and might be just the medicine the doctor ordered to help us move to a more sustainable external position. i ’ d like to say a few words about how monetary policymakers think about the exchange rate when judging the appropriate level for domestic short - term interest rates. as you know, the american economy is relatively closed when compared with individual european countries — u. s. exports of goods and services, for example, are only 14 percent of our gdp, compared with germany where exports are 31 percent

rapid, forceful, and sustained policy response, many sectors of the economy would be able to bounce back strongly once the virus was under control. that response would need to come from actions across all levels of government, from health and fiscal authorities, and from the federal reserve. it also seemed likely that the sectors most affected by the pandemic — those relying on extensive in - person contact — would face a long and difficult path to recovery. these sectors and people working in them would likely need targeted and sustained policy support. some asked what the fed could do to address what was essentially a medical emergency. we identified three ways that our tools could help limit the economic damage from the pandemic : providing stability and relief during the acute phase of the crisis when much of the economy was shut down ; vigorously supporting the expansion when it came ; and doing what we could to limit longer - run damage to the productive capacity of the economy. 1 / 4 bis central bankers'speeches the recession and nascent recovery when it became clear in late february that the disease was spreading worldwide, financial markets were roiled by a global flight to cash. by the end of the month, many important markets were faltering, raising the threat of a financial crisis that could exacerbate the economic fallout of the pandemic. widespread economic shutdowns began in march, and in the united states, with many sectors shut down or operating well below capacity, real gdp fell 31 percent in the second quarter on an annualized basis. employers slashed payrolls by 22 million, with those on temporary layoff rising by 17 million. broader measures of labor market conditions, such as labor force participation and those working part time for economic reasons, showed further damage. in response, we deployed the full range of tools at our disposal, cutting rates to their effective lower bound ; conducting unprecedented quantities of asset purchases ; and establishing a range of emergency lending facilities to restore market function and support the flow of credit to households, businesses, and state and local governments. we also implemented targeted and temporary measures to allow banks to better support their customers. the fiscal response was truly extraordinary. the unanimous passage of the cares act and three other bills passed with broad support in march and april established wide - ranging programs that are expected to provide roughly $ 3 trillion in economic support overall — by far the largest and most innovative fiscal response to an economic crisis since the great depression. what have these policies managed to accomplish so far? first, the substantial fiscal