11  See Special feature A “Financial integration and risk sharing in a monetary union”, in Financial Integration in Europe, ECB, April 2016 and Box 1 “What could enhance private financial risk sharing in the euro area?” in Financial Integration in Europe, ECB, May 2018. See also Asdrubali, P., Sorensen, B. and Yosha, O., (1996) “Channels of interstate risk sharing: United States 1963-1990”, Quarterly Journal of Economics, 111, 1081-1110; Athanasoulis, S. and van Wincoop, E. (2001) “Risk sharing within the United States: What do financial markets and fiscal federalism accomplish?”, Review of Economics and Statistics, 83, 688-698. 16
So the Bank of England has taken extraordinary measures – described as “quantitative easing” – to boost the supply of money in order to support a recovery in the economy and keep inflation on track to meet our target. And because monetary policy is a flexible instrument that can be changed in either direction each month, it is the best tool for managing the economy in the short run. Nevertheless, the road ahead is unlikely to be straight. There is considerable uncertainty about the prospects for both the United States and the euro area – our most important export markets. Business and consumer confidence at home has weakened recently, and it will be some time before our banking sector is able to finance a recovery on the usual terms. The transition to a better balanced economy will be difficult. But we are already seeing encouraging signs of expansion in manufacturing and UK exports. This morning’s figures show a small rise in the claimant count and a small fall in the Labour Force Survey measures of unemployment. But the big picture is that unemployment is higher than before the crisis but lower than many had feared a year ago. In July, on one of my regular visits to different parts of the country, I met with the Scottish TUC in Glasgow to learn more about the labour market there. Our contacts with experienced union officials in touch with a range of companies and sectors are the best source of intelligence on labour markets.