Welcome address by Philip R. Lane, Member of the Executive Board of the ECB, at the ECB Conference on Money Markets

Frankfurt am Main, 9 November 2023

Introduction

My aim in these opening remarks is to explore the macroeconomics of central bank liquidity. In particular, my focus is on how central bank reserves can influence macroeconomic outcomes. In turn, if central bank reserves are relevant for the level and volatility of economic activity and inflation, the calculation of the appropriate level of central bank liquidity should take into account the (time-varying) macroeconomic impact.^[1]

The macroeconomic analysis of central bank reserves is necessarily subject to high uncertainty, since it is challenging to control for various confounding factors in conducting empirical analysis. In particular, the creation of central bank reserves on the liability side of the central bank balance sheet is typically matched by an increase in collateralised loans (refinancing operations) to banks…