International arrangements for a resilient global economy

Keynote speech by Mr Jaime Caruana, General Manager of the BIS, at the conference on "The uncertain future of global economic integration", jointly organised by the Central Bank of Iceland and the Reinventing Bretton Woods Committee, Reykjavik, 14 September 2017.

The existing international monetary and financial system leaves much room for improvement. In financial regulation, extensive international cooperation coexists with domestic mandates. Yet, when it comes to monetary policy, domestic mandates are broadly considered to rule out cooperation. This is so even though these policies' international spillovers through global financial markets are widely recognised to be powerful.

It is true that, if policymakers could better manage their own domestic financial cycles, they would already constrain excesses and reduce spillovers. But keeping one's own house in order is not enough. Policymakers should also give more weight to how domestic policies interact at a global level. A necessary step is to reach a common understanding of how various spillovers and spillbacks work. Developing analytical frameworks that better capture these effects is a start. Going one step further, more international cooperation on monetary policy could also provide backing for financial stability. Monetary policymakers should take further practical steps to complement their domestic analysis with a more global perspective.