20 Sorting out these unusual risk premia effects is crucial for conducting appropriate monetary policy and for communicating the monetary policy stance to the public and to market participants. 18  John B. Taylor, 1993, “Discretion versus Policy Rules in Practice”, Carnegie Rochester Conference Series on Public Policy 39, December, 195-214. 19  For a discussion of various types of the Taylor rule see Athanasios Orphanides, 2007, “Taylor Rules”, Finance and Economics Discussion Series 18. Federal Reserve Board. 20  Taylor, 1993, p. 198. 6  BIS Review 141/2007  3. Conclusion  Let me conclude by reiterating that much of the central banks' motivation for their involvement in financial stability is rooted in their role as providers of liquidity in general, and of emergency liquidity in particular. At the same time, it has to be recognized that central banks have a very limited arsenal of instruments to deal with crises situations. A change in the level of official target interest rate is in many ways a crude instrument that, in my view, is best deployed with a firm focus on trying to keep the economy where our statutory mandate tells us to keep it. This does not, of course, preclude a change in interest rates in the event of a crisis, but only to the extent that the risks from the crisis to the economy justify a change in policy. The current market turmoil is providing countless lessons to the industry as well as to the official sector.
But we also must keep in mind the implications for the functioning of the global financial system in the near and medium term. This requires consideration of prospects for restoring normal market functioning and access, and the creation of appropriate incentives. •  When difficulties arise, the challenge remains, as always, to encourage and work with countries that are ready and able to implement strong corrective actions and to find financial solutions best suited to both the specific case and the broader functioning of the global financial system. A flexible, case-by-case, managed-market approach, represents the best bet - - and the only realistic option - - for achieving those goals as we face a challenging future. Thank you. BIS Review 61/2002  7