François Villeroy de Galhau: Central bank role to support a strong and sustainable growth in the medium and long term Speech by Mr François Villeroy de Galhau, Governor of the Bank of France, at the global economic symposium “Reigniting Global Growth: Headwinds and Tailwinds”, co-hosted by The National Association for Business Economics (NABE) and the Organisation for Economic Cooperation and Development (OECD), Paris, 23 May 2016. *  *  *  Introduction Good evening ladies and gentlemen. It is a pleasure for me to be here this evening. A wellknown joke asks “how many central bank economists does it take to screw in a light bulb?” and answers “Just one – he holds the light bulb and the whole earth revolves around him”. By addressing the role of central banks in supporting growth, you may think I am taking a step too far my role as a central banker. But as you will see, my views are more modest. As we all know, growth in the long run is determined by real forces: the accumulation of physical capital, the development of new products and production techniques, the provision of public infrastructure, investment in education and skills and the efficient allocation of resources between alternative uses. Long run growth is not determined by anything nominal and thus it may seem odd to think that central banks play any role in supporting strong and sustainable growth in the medium and long term. Monetary policy is usually seen as the demand and supply side.
All indicators, from the matching process on the labour market to the reallocation of resources among firms, have shown how serious the shocks from the great recession have been, vindicating a large-scale and determined reaction of economic policy across the world. In this global economic policy reaction, it would be hard to argue that central banks have not done their share of the job. At the current juncture, however, all need to do their share. Focusing on the euro area, I am convinced that we would do much better with more growth-enhancing fiscal policies, especially in the member states that have fiscal space, and, at the same time, more ambitious structural reforms, especially in the member states that don’t have fiscal space. Indeed, this is probably the most subtle criticism of the active monetary policy currently undertaken by central banks: has it been an excuse for inaction by other public authorities, in particular structural reforms? Our answer cannot be to stop doing our own job but, drawing on the legitimacy given by our own actions, to strongly invite governments to do more. In particular in my own country, here in Paris, reforms are necessary, as I stressed in my recent Letter to the French President some days ago. But reforms are also possible. Yes, France too, like many of its successful European neighbours, is “reformable”. I thank you for your attention and wish you an excellent dinner. BIS central bankers’ speeches  5