Let me put it differently: is potential growth in those economies being affected by the fact that one part of the world, with nearly two-thirds of its population, is growing on average by 6–7% (or more) per year? If so, in what ways? One hypothesis which we may want to assess and test is that the so-called “long term equilibrium” variables which are so important in our economic models are in fact affected by globalisation, as advanced economies are becoming smaller and smaller. Not taking this into account may induce policy-makers to misjudge the situation and cause international surveillance to fail. These are clearly very difficult issues to examine. However, it seems to me that the analysis so far is insufficient. I won’t go into detail but would just like to pose some questions. Growth The first issue, or question, I would like to raise is whether the increase in growth rates in EMEs has had, and will have, a negative or a positive impact on trend growth in advanced economies. Taking a standard neo-classical trade model, the answer depends on various assumptions. The prevailing consensus is that globalisation provides opportunities for all, including advanced economies; their growth will not necessarily suffer. This is the conventional wisdom.
The textbooks which most of us studied depicted a world economy different from the one we are confronted with today and certainly different from the one which will take shape in the coming years. That environment was characterised by one large economy, which set the reference interest rate, and by many small ones. What used to be the leading economies are getting smaller and smaller, while others are growing fast and becoming systemically relevant. The imbalances are the result of both sides not fully recognising these opposite developments and acting as if the old paradigm was still valid. What is required are not changes at the margin, but a global framework that can encompass the unprecedented changes which are taking place. Otherwise our analysis will fall short, our surveillance will remain weak, and the policy mistakes may become more frequent, and more costly. Thank you for your attention. Chart 1: Real GDP in selected countries and regions  Note: Annual; 1992 = 100. Data based on IMF WEO October 2010 database. Grey shaded area indicates the evolution based on the IMF October 2010 WEO projections up to 2015. Sources: IMF WEO and ECB staff calculations. 6  BIS central bankers’ speeches  Chart 2: Real GDP per capita in selected countries and regions  Note: Annual; 1992 = 100. Data shown is calculated on the basis of 2000 constant US dollar series. Sources: World Bank Development Indicators Database, Haver Analytics and ECB staff calculations.