Such a process will facilitate the proper functioning of pricing mechanisms in financial markets and in turn generate economic dynamism through the efficient allocation of funds. Three elements underlie the new framework for the conduct of monetary policy. BIS Review 20/2006  5  First, the Bank has clarified its thinking on price stability, which is a stated objective of monetary policy.
Governments failed to address structural rigidities in the euro area economies – relating to, among other things, wage-setting institutions, including wage indexation, and to labour and product market regulation. An institutional framework focusing on the early identification and correction of macroeconomic imbalances would have helped to prevent these problems.