Conclusion I will now place my observations on monetary policy in a broader context and formulate three key messages. But before doing so, I would like to point out that the decision to adopt an independent monetary policy is not a purely economic one. Central banks act within the framework that is laid down for them by the legislature and, ultimately, the sovereign power. The culture and history of a country play an important role in selecting the national monetary order. And now I come to my three key messages. My first message is that it is possible for small open economies bordering a large currency area to pursue an independent monetary policy. It allows the central bank to react to disruptions specific to its own country and to ensure price stability in the medium term. For example, following the onset of the financial crisis, central banks in Europe lowered their  10  The first central bank outside Europe to introduce negative interest rates was the Bank of Japan, at the end of January 2016. 8  BIS central bankers’ speeches  interest rates at different points in time and to varying degrees to cushion the effects of the demand slump. Both conventional and unconventional monetary policy measures helped to absorb the shocks of the euro crisis and the ECB’s substantial monetary policy easing from March 2014. My second message is that in times of crisis, monetary policy’s usual room for manoeuvre can be quickly exhausted, making unconventional measures necessary.
BIS central bankers’ speeches  9  Chart 1  Chart 2  Sources: Datastream, SNB  10  BIS central bankers’ speeches  Chart 3  Sources: OECD, Riksbank, SNB, Statistics Denmark, Statistics Sweden  Chart 4  Sources: CNB, Danmarks Nationalbank, ECB, Riksbank, SNB  BIS central bankers’ speeches  11  Chart 5  Sources: Eurostat, SNB  Chart 6  Sources: CNB, Danmarks Nationalbank, ECB, Riksbank, SNB  12  BIS central bankers’ speeches  Chart 7  Sources: Bloomberg, SNB  Chart 8  Sources: Eurostat, SNB  BIS central bankers’ speeches  13  Chart 9  Sources: Eurostat, SNB  Chart 10  Sources: Eurostat, SNB  14  BIS central bankers’ speeches  Chart 11  Sources: Eurostat, SNB  Chart 12  Sources: CNB, Danmarks Nationalbank, ECB, Riksbank, SNB  BIS central bankers’ speeches  15  Chart 13  Sources: OECD, Riksbank, SNB, Statistics Denmark, Statistics Sweden  Chart 14  Sources: BIS, SNB  16  BIS central bankers’ speeches  Chart 15  Sources: Bloomberg, Danmarks Nationalbank, Riksbank, SNB  Chart 16  Sources: Bloomberg, Danmarks Nationalbank, Riksbank, SNB  BIS central bankers’ speeches  17  Chart 17  Sources: Datastream, SNB  18  BIS central bankers’ speeches