If this is the case, the nominal policy rate will not necessarily return to its pre-crisis levels. There are, however, other economists who argue that the observed drop in real rates was mainly of a cyclical nature. If this view is correct, the steps towards neutral monetary policy – steps already undertaken by some central banks in recent years – may easily continue to the pre-crisis levels. I am therefore glad that we have here two papers that may shed some more light on this policy important topic. The next session will be devoted to the exchange rate. Nobody doubts that exchange rate movements are of utmost importance for open economies. The papers in this session analyse the monetary policy channel of the exchange rate and the possibilities of international policy 1/2  BIS central bankers' speeches  coordination. Both are simultaneously fascinating and policy relevant. Friday, the second day of our conference, will include two sessions. One will be dedicated to bounded rationality in macroeconomics. The rational expectations revolution that started in the late 1960s changed modern macroeconomics in a significant way. The rise of new Keynesian DSGE models some 20 years ago demonstrated that the rational expectations approach can be fruitfully applied even to large-scale models that are of practical use in policy institutions such as central banks and international organisations. Let me remark that the CNB has been successfully using its own DSGE model as its main forecasting and policy analysis tool for more than a decade now.
On the other hand, the experience with models based fully on rational expectations sometimes shows that certain aspects or policy implications are at odds with what is considered reasonable. One example is the forward guidance puzzle, i.e. the unrealistically large responses of inflation, long-term rates and output to the announcement of the future path of interest rates. Therefore, we as macroeconomists want to reconsider the assumption of superrational agents and replace it with something more realistic. The second session on Friday will be devoted to two papers that may challenge our ideas about the economy and the way we think in terms of our usual models. It is always extremely useful to listen to new concepts and visions and to rethink our current approaches. Discussing thoughtprovoking and stimulating papers is the only way to avoid rigidity in ideas and opinions. Rigidity that will – sooner or later – lead to wrong attitudes and decisions. I believe that good policymaking will always benefit from cutting-edge research. I would therefore like to thank the participants of the high-level policy panel, the presenters and commentators in the individual sessions, and all other participants for coming to our event. Ladies and gentlemen, thank you for your attention. I wish you all an interesting conference, fruitful discussions and an enjoyable stay in Prague. 2/2  BIS central bankers' speeches