Second, financial integration has implications for financial stability. As you are certainly aware, the Treaty (Article 105(5)) calls upon the Eurosystem to contribute “to the smooth conduct of policies pursued by the competent authorities relating to the prudential supervision of credit institutions and the stability of the financial system”.
Monetary institutions that have been more explicit in delineating what they mean – in numerical terms – by “price stability” have been more successful in promoting lower inflation and lower output variability.3 However, an appropriate mandate is a necessary but not a sufficient condition for lasting macroeconomic stability.