the implications for welfare of spillovers across economies and policies. cooperation between the ecb and other major central banks is and will remain extensive and effective, building on a common ground of shared experience and mutual trust. thank you for your attention. bis ( 2011 ) : global liquidity – concept, measurement and policy implications, cgfs publications no 45 november 2011. ( http : / / www. bis. org / publ / cgfs45. pdf ) imf ( 2011 ) : the multilateral aspects of ( http : / / www. imf. org / external / np / pp / eng / 2011 / 101311. pdf ) international exchanges of information do not necessarily produce better outcomes, as shown e. g. by j. frankel and k. rockett ( 1988 ), “ international macroeconomic policy coordination when policy - makers disagree on the model ”, american economic review 78. for a survey of this literature, see also a. ghosh and p. masson ( 1994 ), “ economic cooperation in an uncertain world ”, blackwell, oxford. bis central bankers ’ speeches policies affecting capital flows,

their currency, the world will get closer to the monetary stimulus necessary to outweigh excessive fiscal zeal ”, from “ g20 in search of recovery ”, financial times february 2013, http : / / www. ft. com / intl / cms / s / 0 / cec13222 - 76a2 - 11e2 - 856900144feabdc0. html # axzz2o5gvvozi bis central bankers ’ speeches been and is likely to remain very accommodative. moreover, the “ panglossian ” approach to coordination may create difficulties of its own, as i shall illustrate later on. 2. monetary policy limits and the costs of competitive devaluations it would be simplistic to think that countries should always put up with any exchange rate movement generated by policy actions abroad, when the latter aim to address domestic problems and are not carried out through overt currency manipulations. let me list here three reasons why there are limits to non - cooperative policy responses to exchange rate movements following foreign monetary policy shocks. first, it is true that starting in the mid - 1980s the economic literature by and large finds only modest gains from international policy cooperation. 4 this consensus, although not undisputed, 5 has been reinforced by the paradigm shift in international macroeconomic theory from the mundell - fleming - dornbusch model to the new open economy macroeconomics. 6 however, the workhorse open - economy model underlying those results describes a benign, frictionless environment, with only moderate macroeconomic interdependence. these theoretical economies are in an ideal state of “ divine coincidence ” : one policy instrument suffices to achieve all targets, quite independently of policy decisions abroad. 7 in the real world, a number of market frictions – in particular of a financial nature – have been identified as channels of large cross - country spillovers and, hence, as potential sources of non - trivial gains from cooperation – particularly concerning unconventional policies. 8 the ever stronger global integration of trade in goods and services and, in particular, in financial markets makes the issue of central bank cooperation ever more relevant today. second, a group of large, systemically relevant economies has not been affected symmetrically by the crisis. as noted by barry eichengreen, 9 this is an important difference with the interwar period. insofar as they have decoupled from advanced economies, the main policy concern