2  OECD (2016), Economic Policy Reforms 2016: Going For Growth Interim Report, OECD Publishing, Paris. BIS central bankers’ speeches  1  The weak recovery is also very much related to the problem of demand deficiency – a situation associated with aggregate demand being less than the aggregate supply corresponding to full employment level of output in the economy. And this is probably driven by high indebtedness levels in government and private balance sheets across the world including both advanced and emerging market economies. As a matter of fact, the impaired private balance sheets caused the so-called balance sheet recession of 2008–2009 in AEs as in the USA during the great depression and in Japan during the years following the Japanese financial crisis of 1991. Now, not only the private sectors – financial, non-financial and households – of AEs but also their governments and more importantly EME private sectors suffer from high indebtedness levels. For example, some EME households have debt as large as 75 to 95 percent of GDP. Moreover, EME private balance sheets largely consist of external liabilities as opposed to domestic currency denominated assets, which expose them to increases in the cost of debtservicing foreign currency – denominated external obligations in cases of real exchange rate depreciation. Recent research suggests that agents tend to cut back their spending when their debt reaches certain levels.3,4 Going forward, we are likely to see only a gradual improvement in this stock balances problem as they take longer time to heal than flow balances problems.
Jean-Pierre Roth: Ten years’ experience in steering interest rates – taking stock of the Swiss National Bank’s monetary policy strategy Summary of a speech by Mr Jean-Pierre Roth, Chairman of the Governing Board of the Swiss National Bank, at the University of Fribourg, Fribourg, 20 November 2009. The complete speech can be found in French on the Swiss National Bank’s website (www.snb.ch). *  *  *  The Swiss National Bank’s monetary policy strategy has proved successful over the ten years since its introduction. Throughout this period, the SNB fulfilled its mandate of ensuring price stability while taking into account economic developments. The inflation forecasts, produced quarterly on the basis of various indicators, have proved especially useful. It has always been possible to successfully manage the Libor – the operational objective of the SNB’s monetary policy – despite an international environment which, at times, has been extremely turbulent. The Libor was maintained within a range intended to provide the bestpossible conditions for a favourable development of the Swiss economy.