6  BIS Review 28/2001  Thus, relative wages are better anchored and tend to better reflect demand and supply conditions in particular markets. I regard all this as an extraordinarily important contribution, since I spent two years with the Anti-Inflation Board struggling to settle down a labour market that had become terribly distorted by high inflation in the early 1970s.
Overall, credibility has stabilized the inflation process and, therefore, inflation itself. Moreover, effective monetary policy seems to have reduced the variability in the real economy as well. The credibility of fiscal policy has enhanced investment planning by the business sector since it has drastically reduced the risk of future increases in taxes stemming from a need to deal with fiscal problems.