Europe and the world economy

Philip R. Lane, Member of the Executive Board of the European Central Bank (ECB), delivered a keynote speech at the Asian Monetary Policy Forum, examining Europe’s role in the global economy.

He highlighted Europe’s high trade openness, its integration into global value chains, and the increasing influence of Asia, particularly China, on trade dynamics and competitiveness.

Lane discussed the resilience of euro area trade relationships with Asia during turbulent periods, the challenges posed by rising Asian competitiveness, and the shifting export market shares within the euro area.

The speech covered the effects of energy prices, Chinese export controls on critical raw materials, and the influence of exchange rate developments on euro area competitiveness.

He emphasized the importance of ECB’s macroeconomic models, such as ECB-Global, DSGE, and MCMS-ONKIO, in analyzing global spillovers, supply chain disruptions, and structural transitions like energy transition policies and decarbonization.

Lane also addressed how global shocks, including US monetary policy, Asian growth, and geopolitical tensions, influence euro area inflation, output, and monetary policy decisions, stressing the importance of shock identification and model-based scenario analysis for effective policy calibration.

He concluded that Asia’s growing role and global interconnectedness make understanding external shocks essential for euro area monetary policy, supported by advanced global models.

Source: ECB Keynote Speech