Speech by Mario Draghi, President of the ECB,
on receiving an honorary degree in political science, LUISS “Guido Carli” University,
Rome, 6 May 2013
My first grateful and fond mention goes to Guido Carli. My gratitude goes to the university that bears his name, to its Rector, Professor Massimo Egidi, to its Senatus Academicus, which has honoured me with this title, and to Professor Messori for his kind words, as well as to the entire academic body of this university.
The origins of the crisis in the euro area
Until a few years ago monetary policy was considered a textbook discipline, almost a mechanical skill involving the implementation of computational applications by conscientious experts. In the period known as the Great Moderation, from the middle of the 1980s to the beginning of the global financial crisis, inflation had been brought under control. Macroeconomic volatility was contained and this was a source of great pride for all central bankers. Some foresaw a future of genteel and honourable oblivion for monetary policy. This is no longer the case. The experience of the first five years following the crisis shows that all central banks have adjusted their monetary policies along hitherto unexplored lines: some have been abandoned and no new paradigm has yet been formulated, the wish is to put an end to the emergency and return to normality where the rules are based on a well-established discipline of long standing, but it is not known with any certainty what reality will emerge in the long term. Furthermore, although the precise shape of monetary policy has always been influenced by the respective institutional and historical context – consider the varying “mandates” of the central banks – the various forms that the crisis took in different parts of the world reinforced this correspondence between the specific institutional and financial contexts and the monetary policies pursued in them.