A series of factors can account for this behaviour. Some are transitory, such as the insufficient increase in employment, or the impact of deleveraging processes in some economies. But there are 4/7  also factors of a more structural nature, including the effect of globalisation and technological progress, or demographic factors. In any event, it should be stressed that there are other policies apart from monetary policy. In particular, both fiscal policy and structural reforms have a key role to play in supporting demand, boosting real interest rates and raising productivity and potential growth. Regarding monetary policy, the central question is this: to what extent should the macroeconomy of the “new normal” lead to a new “conventional model” for monetary policy? In particular, it is considered whether the management of the central bank’s balance sheet will become entrenched as a permanent part of the normal instruments of monetary policy. Estimates, while subject to major uncertainty, suggest that real interest rates and inflation will remain at low levels, meaning that nominal rates will also be low, thereby limiting their effectiveness as a monetary policy instrument. Against this background, central banks are likely to retain the use of unconventional monetary policies. Analysis of these policies is leading to debate, as yet inconclusive, on their effectiveness, the optimal size of central bank balance sheets and on the impact that they might have in terms of financial stability and the medium- and long-term fiscal situation.
•  Most notably, the country would import the ECB’s credibility, which could possibly lead to a lower inflation rate. •  Euroisation would also eliminate exchange rate risk. In turn, the country in question may benefit from lower interest rates. •  On the micro-economic side, euroisation would lead to lower transaction costs, and might provide a boost to trade and financial integration. These benefits can, however, not be taken for granted. Most of these benefits can indeed only be reaped if they are supported by sound economic policies. •  For instance, inflation may still be running high in case of pro-cyclical fiscal and wage policies. Accordingly, euroisation cannot be a substitute for stability-oriented policies. •  Again, this underlines the importance of having in place a stability-oriented macroeconomic framework, such as the one established at EU level. What are the possible costs and risks of euroisation? •  First of all, the country in question may face an inappropriate monetary policy stance in case of diverging business cycles. The loss of an independent monetary policy and the exchange rate instrument may make it more difficult for the country in question to respond to idiosyncratic shocks, or to correct a loss of competitiveness. •  The country in question could also run into logistical difficulties, since it would exclusively depend upon private arrangements with credit institutions for a number of key services, such as banknote handling and the execution of high-value payments.