22  All speeches are available online at www.bankofengland.co.uk/speeches  22  Chart A: Divine coincidence has continued to reign in the euro area and US post-crisis but not the UK A1) UK Great moderation  Inflation (%)  6  Financial crisis and after 4  Inflationary, with trade-off  Inflationary, no trade-off  2 -6  -5  -4  -3  -2  -1  0  1  2 3 4 Excess demand (%)  0 Disinflationary, no trade-off  Disinflationary, with trade-off -2  Sources: ONS and Bank calculations. A2) US Great moderation  6  Financial crisis and after  5  Inflation (%)  4 3 2 -8  -7  -6  -5  -4  -3  -2  -1  0 1  1  2  3  4  Excess demand (%)  0 -1 -2 Sources: Bureau of Economic Analysis, CBO and Bank calculations. Notes: The measure of inflation is the four-quarter change in the personal consumption expenditures (PCE) deflator. The output gap is calculated using the CBO estimate of potential output. 23  All speeches are available online at www.bankofengland.co.uk/speeches  23  A3) Euro-area Inflation (%)  5  Great moderation Financial crisis and after  4 3 8 2 -4  -3  -2  -1  0  1  1  2  3 4 Excess demand (%)  0 -1 Sources: Eurostat, IMF and Bank calculations.
Michael C Bonello: Regional economic integration - the options for Malta Speech by Mr Michael C Bonello, Governor of the Central Bank of Malta, at the Annual Dinner of the Institute of Financial Services, St. Julian’s, 7 November 2002. *  *  *  In previous years I used this occasion to focus on issues related to the country’s perennial challenge, which is to converge to the economic standards of its more developed trading partners. Among the appropriate responses to this challenge I emphasised the importance of price and financial stability, fiscal restraint, market-based reforms and a viable exchange rate strategy. These are indeed necessary elements of a strong macroeconomic policy framework conducive to export-led growth. The issue I shall address today is the need to complement these policies with a more secure access to international markets. The reason is simple. Without such access, a small open economy like ours cannot hope to achieve sustained, quality growth in today’s globalized world. A structured, regional approach to building competitiveness In a world economy driven by cross-border flows of foreign direct investment (FDI) seeking the most profitable locations, the challenge of sustaining economic growth must be faced head on by endeavouring to maintain cost competitiveness and gaining access to larger markets. Studies have shown that countries which are more open to trade tend to achieve higher growth rates compared to 1 less open economies at comparable stages of development.