As a background to my comments on the topic of this panel, “Where do central banks go from here?”, let me note that, as the world economy recovers from the recent financial crisis and the Great Recession that followed, a debate is underway regarding the causes of the crisis and how to reduce the risk of future crises. The role of monetary policy and its relation to financial stability are also under debate. Some blame the Federal Reserve, saying that its monetary policy was too expansionary after 2001 and that this laid the foundations for the crisis. The lesson to be drawn, they argue is that there is a need to modify the framework of flexible inflation targeting and give a greater role to financial-stability considerations. In my view, the crisis was largely caused by factors that had very little to do with monetary policy. Instead, it was mainly caused by regulatory and supervisory failures in combination with some special circumstances, such as low real interest rates around the world and housing policy in the United States. Neither do I share the view that there is a need to fundamentally modify the framework of flexible inflation targeting. Ultimately, my main conclusion for monetary policy is that flexible inflation targeting – applied in the right way and in particular using all the information about financial conditions that is relevant for the forecast of inflation and resource utilisation at any horizon – remains the best-practice monetary policy before, during, and after the financial crisis.
Benoît Cœuré: Policy coordination in a multipolar world Remarks by Benoît Cœuré, Member of the Executive Board of the ECB, at the 5th annual Cusco conference organised by the Central Reserve Bank of Peru and the Reinventing Bretton Woods Committee: “70 years after Bretton Woods: Managing the interconnectedness of the world economy”, Cusco, 22 July 2014 *  *  *  I would like to thank Michele Ca’ Zorzi and G. Georgiadis for contributing to these remarks. I remain solely responsible for the opinions expressed herein. Dear Governor Velarde, dear Marc Uzan, ladies and gentlemen, I would like to thank the organisers for giving me the opportunity to share some thoughts with you on the changes in the international monetary system (IMS) and the role of monetary policy coordination. History casts a long shadow over the IMS. Over the past three decades, however, the global economy has changed in decisive ways. Three aspects are particularly striking. First, financial factors have become an increasingly relevant source of cross-country interlinkages, with some evidence of cross-country de-linkages since the global financial crisis. Second, emerging economies have raised their clout, as reflected by the impact of their business cycles on global growth and the growing use of their currencies: the global economy has become multipolar. And third, monetary policy in advanced economies has – more recently – entered new territory by resorting to unconventional measures.