Equally, a structurally-robust financial system is stabilising for the real economy by avoiding pro-cyclical fluctuations in credit availability. So far, I have primarily focused on fiscal and macroprudential policies. How should we think about the role of the currency system in addressing the implications of globalisation for macro-financial stability?
The obvious starting point is the monetary trilemma: financial integration calls for a choice between a stable exchange rate and an independent monetary policy. In Europe, the monetary union provides a unique option: the sharing of monetary autonomy among the member countries through the elimination of national currencies, with the external value of the euro fluctuating against the rest of the world.