benoit cœure : the international dimension of the ecb ’ s asset purchase programme speech by mr benoit cœure, member of the executive board of the european central bank, at the foreign exchange contact group meeting, frankfurt am main, 11 july 2017. * * * large - scale asset purchase programmes have become an integral part of the set of unconventional tools central banks use to achieve their domestic objectives. when faced with negative output gaps and policy interest rates approaching their effective lower bound, these programmes have given central banks an essential tool to continue providing additional monetary accommodation, and prevent their domestic economies from falling into a deflationary trap. yet, in a world of integrated financial markets, purchase programmes do not only have domestic effects. this has been recognised by policymakers in the past. for example, there has been a lively debate about the effects of the federal reserve ’ s purchase programmes on financing conditions in emerging market economies. [ 2 ] however, less attention has been paid to this aspect in the case of the euro area – that is, the international spillovers of the ecb ’ s asset purchase programme ( app ). this is what i would like to discuss in my remarks today. specifically, i plan to cover two topics. first, i will review what we know about the app ’ s effect on net capital flows out of the euro area. and second, i will look at whether these capital flows have depressed exchange rates and, as a result, diverted demand away from other economies. my main message is that the ecb ’ s app does appear to have triggered substantial capital flows across borders. but it is far from clear whether this explains the depreciation in the effective exchange rate of the euro. in fact, asset purchases affect the exchange rate in broadly the same way as conventional monetary policy – through expectations of interest rate differentials. moreover, while unconventional monetary policies may drive down exchange rates, it does not make them a zero - sum game. the evidence suggests that the demand - boosting effects dominate – that is, the spillovers from our unconventional monetary policies have boosted growth and inflation prospects, not only in the euro area but also globally. post - app international capital flows let ’ s start, then, by trying to get a sense of how strong international capital flows have been since we began our large - scale asset purchases. in other words, to what extent has there been a rebalancing towards foreign assets? here some stylised facts from the euro area

to pursue fiscal activism. it remains essential that both the commitments made in the stability programmes and the requests to further improve fiscal positions, as subsequently agreed in the ecofin council, are implemented in full. this will help to build confidence in the fiscal framework and anchor expectations about the future macroeconomic environment. in a highly uncertain environment, it is all the more essential that governments help to boost investor and consumer confidence by taking decisive action to implement structural reforms in labour and product markets and in public finance. on the one hand, there appears to be a broad consensus among policymakers and the public that such reforms are important to ultimately raise the euro area ’ s production potential, improve the flexibility of the economy and make the euro area more resilient to external shocks. on the other hand, notwithstanding some progress in individual countries, the effective pace of reform has so far remained slow and clearly insufficient to meet the lisbon objectives. over the past few years this has given rise to an implementation gap. efforts to overcome structural inefficiencies in the functioning of markets must be stepped up. this would promote confidence in the medium - term production capacity of the euro area and therefore counteract to some extent the current high degree of uncertainty. we are now at your disposal for questions.