Certainly, the more flexible is your economy (in terms of public finances, the labour market, and so on), the easier it is to cope with shocks and the less monetary policy is needed. However, the case of the Eurozone shows how tricky it is when the absorber in the form of monetary policy is switched off and nothing replaces it. The shocks are bigger and hurt more. Listeners themselves can answer the question of whether the labour market and labour law are likely be made more or less flexible (and dismissals made easier) in the future. In doing so, they will answer the question of whether there will be a need in the future for more or less domestic monetary policy in the Czech Republic, a country whose conservative population is so averse to upswings and downswings. 1/3  BIS central bankers' speeches  The “convergence trilemma” The standard “monetary trilemma”, which you know very well (a country cannot simultaneously have a fixed exchange rate, an open capital account and autonomous monetary policy), is accompanied in a converging economy of our kind with something I call the “convergence trilemma”. No country can simultaneously have high convergence growth, a fixed exchange rate, and low macroeconomic imbalances, be they internal or external. In our case, catching up with our wealthier, low-inflation Western peers means a long-term tendency for our currency to appreciate. This is hardly consistent with a permanently fixed exchange rate.
Funds raised in the US from money market funds were round-tripped back into the US through the purchase of asset-backed securities by European banks. When US money funds withdrew their dollar funding, this chain went into reverse gear causing a dollar funding problem. Understanding those links in the cross-border financing chain is impossible without detailed sectoral data. That is now in train. Yet there remain significant data constraints on our ability to map the macro-financial system of systems in the detail necessary to capture accurately interactions within and across subsystems. Even among the world’s largest banks, data on their bilateral exposures to one another remains partial and patchy, especially for off balance sheet positions and securities holdings. That means large parts of the core of the international banking map remain, essentially, uncharted territory. 10  BIS central bankers’ speeches  These data gaps are even more acute when moving beyond the banking system. Large parts of the non-bank sector remain in the shadows from a data perspective. For example, reliable measures of the aggregate and/or individual leverage, maturity and foreign currency mismatch positions of non-bank intermediaries – some of the key vulnerability metrics – are thin on the ground. The FSB has an agenda to fill these data gaps. More broadly, flows of funds data, both within the financial sector and between it and the wider economy, domestically and internationally, is at present partial.