03. 09. 2018 welcome address second annual research conference of banco de espana 3 september 2018 pablo hernandez de cos governor good morning. i would like to welcome you to the second annual research conference, which this year is jointly organised by banco de espana and the institute for fiscal studies. let me start by thanking our colleagues from ifs. the ifs is a benchmark for rigorous policy analysis, far - reaching influence and frontier academic research, and it is indeed an honour for us to collaborate with them. this meeting has become our flagship research conference with the main goal of bringing together leading scholars and policy - makers to discuss frontier research on recent economic developments and the policy options to address them. last year the conference focused on macro, monetary and macroprudential policies. this year we want to turn our attention to tax and transfer systems. after several years of sustained recovery, the great recession has left a legacy of high public debt ratios, low potential output growth and rising inequality in some countries. for instance, the euro area aggregate public debt i would like to thank olympia bover and roberto ramos for their contributions to this speech. stands at close to 90 % of gdp, almost 25 percentage points up on its pre - crisis level. also, the imf estimates that potential output growth in the major advanced economies has been declining since the early 2000s, this trend being further aggravated by the global financial crisis. currently, potential output for this group of economies is thought to be at around 1. 5 %, a significant drop from the 2 % growth estimated in the pre - crisis period. at the same time, the percentage of wealth held by the richest 10 % of the population of the united states, france or the united kingdom has risen by between 5 pp and 9 pp in the last 25 years. moreover, far - reaching transformations such as globalisation, the digital revolution and demographic trends are all shaping the world economy today, and will continue to do so in the years to come. against this backdrop, tax and transfer systems can play a crucial role in providing sound public finances, increasing potential output and delivering sustainable and inclusive growth. however, meeting these goals poses some significant challenges. and not only because of the intrinsic distortionary nature of taxation and the different existing trade - offs among these three dimensions, but also because see chapter 3 of the april 2015 world economic outlook. see alvaredo, f., l. chancel, t. piketty, e. saez and g. zu

change and rising wage inequality : some problems and puzzles, ” journal of labor economics, 20 ( 4 ), pp. 733 - 783. see guner, n., m. lopez - danieri and g. ventura ( 2016 ) : “ heterogeneity and government revenues : higher taxes at the top? ” journal of monetary economics, 80, pp. 69 - 85. around the globe. for instance, research for the us suggests that profit - shifting to low - tax jurisdictions reduces the tax bill of us - owned companies by about 20 %. thus, globalisation and the growing reliance on intangible assets demand new ideas to limit the erosion of corporate income tax. in this situation, the international dimension of tax design emerges at the forefront of the policy debate. against this backdrop, for instance, the oecd has launched a welcome initiative, known as the base erosion and profit shifting project ( beps ), which brings together 115 countries with the aim of ensuring that profits are taxed where the economic activity takes place and where value is created. as you can see in the conference programme, we have an excellent menu of papers covering a large amount of topics, related to these and other issues. they will provide new and valuable insights in the realm of fiscal policy, and will therefore improve our understanding of this field, both from a theoretical and an empirical perspective. why are all these questions relevant for central banks? in my view, there are sound reasons to argue that the research effort of a central bank need not necessarily be confined to the traditional fields of macro and monetary policy. on the contrary, the deeper and broader our understanding of the see gabriel zucman ( 2014 ), “ taxing across borders : tracking personal wealth and corporate profits ”, journal of economic perspectives, volume 28 ( 4 ), pp. 121 - 148. see http : / / www. oecd. org / tax / beps /. see also the chapter 2 of the april 2018 fiscal monitor of the imf. economy is, the better we will be able to fulfil our task of producing good analyses in monetary and financial matters. in the particular case of tax and benefit systems, they have sizable effects on investment, labour - force participation and productivity, and hence on potential output growth and the level of the natural rate of interest. in addition, apart from potential discretionary decisions, tax and benefit systems are the main ingredient of automatic fiscal stabilisers