Philip R Lane: The international transmission of monetary policy

Keynote speech by Mr Philip R Lane, Member of the Executive Board of the European Central Bank, at the CEPR International Macroeconomics and Finance Programme Meeting, Frankfurt am Main, 14 November 2019.

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

It is a pleasure to speak at the annual meeting of the CEPR's International Macroeconomics and Finance (IMF) Programme, hosted this year here at the ECB. I briefly led this programme before my switch to central banking in 2015 and my aim in this speech is to explore some inter-connections between the research agenda of this programme's research agenda and the analytics of the monetary policy issues that occupy me in my current role. In particular, I wish to focus on the international transmission of the ECB's monetary policy, which is central to evaluating how our monetary policy affects both the euro area economy and, through various spillover mechanisms, the global economy.

The euro area is deeply integrated into the global economy, which means that our analysis universally needs to take into account open-economy dimensions. The euro area contributes about 15 percent to global GDP and accounts for a similar share of global exports and imports. Furthermore, the participation of European firms in global value chains is substantial: even excluding intra-euro area trade, foreign value added as a percentage of gross exports amounts to as much as a fifth of gross exports. On the financial side, euro-denominated asset prices are heavily influenced by global factors, while the high volumes of external assets and liabilities held by euro area residents mean that the international balance sheet is quantitatively important in determining the impact of domestic and foreign shocks.