Philip R Lane: Globalisation and monetary policy

Speech by Mr Philip R Lane, Member of the Executive Board of the European Central Bank, at the University of California, Los Angeles, California, 30 September 2019.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Central bank speech  | 
01 October 2019

It is a pleasure to contribute to UCLA's Master of Applied Economics Distinguished Speaker Series. Los Angeles is a good setting for me to reflect upon the importance of globalisation: around USD 300 billion of US imports and exports pass through the port here every year - around half of which are to or from China - while Californian firms are at the forefront of many global industries. Globalisation has fundamentally reshaped how the major advanced economies operate (including both the euro area and the United States). The rest of the world is a major destination for the goods and services these design and produce, while providing a broad choice of imports for domestic producers and consumers. Alongside this, the financial systems of the advanced economies have been transformed through global financial flows, while the technological frontier is driven by the global pace of innovation.

It directly follows that central banks must take into account the impact of globalisation on both macro-financial dynamics and the transmission mechanisms through which monetary policy operates. Accordingly, my aim in this lecture is to analyse some dimensions of how globalisation affects the monetary policy of the ECB.