For example, putting some temporary restrictions on cross-border movement of capital could give some but not complete independence of monetary policy. But how do we reconcile independence and co-operation? In my view, we can and should act to enhance co-operation between public authorities, based on at least two elements: Ruling out any currency war, as we clearly stated at the meeting of the International Monetary and Financial Committee in Bali last month. I quote the unanimous communiqué: “[We] will not target our exchange rates for competitive purposes”. Trade multilateralism is at risk, but financial and monetary multilateralism still stands fast. Second, as the G20 Eminent Persons Group (EPG), led by Tharman Shanmugaratnam, rightly stressed in its recent report, we need to put in place a reliable Global Financial Safety Net (GFSN) before the next crisis and co-ordinate its different layers. This should include an “IMF standing liquidity facility”. The GFSN is the best insurance we can get against the risks created by economic divergence and it comes at a limited cost. I know that Governor Kuroda is very committed to this issue too. ** Let me conclude by quoting a Japanese proverb: “A frog in a well knows nothing of the great ocean” [“I no naka no kaeru taikai-o shirazu”]. In these uncertain times, the temptation is to look inwards, but that would be exactly the wrong thing to do.
According to Banque de France model estimates, the negative impact on GDP of higher import tariffs is 2 to 3 times larger when we account for these indirect channels. And this increase in uncertainty can produce front-loaded negative effects, even before the effective implementation of protectionist measures. That said, protectionism is first and foremost a negative supply-shock with stagflationary effects. As such, the adverse effects of protectionism cannot and should not be accommodated by monetary policy. In spite of protectionist threats, the global economy continues to expand strongly, at 3.7% this year. In our latest IMF meetings, we have often used the nice French word “plateau” to describe global growth. But this “plateau” is not even: the strong acceleration in the United States, even if it is temporary and fragile, is offset by a moderation elsewhere. In short, the challenge is that we 2/3  BIS central bankers' speeches  are moving from synchronised growth to economic divergence. Consequently, countries might be suffering from the ongoing rise in US interest rates. I do think however that the euro area – like Japan – can determine its own monetary course. The “transatlantic gap”, be it on long-term or on policy rates, is the widest since 2009. But if I turn to emerging countries, they seem to be arranged along a continuum, with some exhibiting total independence at one end to those with exchange rates pegged to the US dollar at the other.