The evidence does not suggest, however, that these capital ﬂows have led to major exchange rate movements. Rather, exchange rates have responded to forward-looking interest rate diﬀerentials. Asset purchase programmes, together with negative interest rates, may have exacerbated those diﬀerentials through signalling and non-linear eﬀects, but their eﬀect on exchange rates is, by and large, not fundamentally diﬀerent from conventional policy.
What is more, currency depreciation is a side-eﬀect of policy and neither its main transmission channel, nor its objective. Monetary policy actions aimed at supporting domestic price stability objectives in advanced economies have been clearly positive for the global economy, mainly by stimulating employment, incomes and, ultimately, economic growth.
This is particularly the case in the euro area, which, thanks to a rich set of carefully calibrated monetary policy measures, is now adding to, rather than subtracting from, global growth. In this sense, the view that asset purchase programmes in large advanced economies have encouraged harmful currency wars is misleading. The world of monetary policy is not an arena where central banks engage and compete for advantage.