During the last three or four years we have had to think thoroughly about the following: •  the link between price stability and financial stability,  •  the link between monetary policy stance and its implementation, and  •  the link between monetary policy and fiscal policy.
Financial stability and price stability Let me start from the relationship between financial stability and price stability. Here, the crisis has inspired a lot of rethinking. Some commentators, such as Paul DeGrauwe1, have gone so far as to suggest that the crisis has revealed inflation targeting as a “fallacy”. Others, such as Lars Svensson2 maintain their belief in strict, forecast-based inflation targeting.