On the one hand, it is tautological to say that crises are unpredictable, or else  2  It is out of the scope of this presentation to discuss the role of monetary policy in causing the crisis. As I have argued elsewhere (De Gregorio, 2010), the cause of the crisis was mainly financial fragility, while lax monetary policy played only a secondary role. Many countries, such as Chile or Canada, for example, had very expansionary policy before the crisis, and did not suffer a financial collapse. BIS Review 84/2010  3  they would never occur. History is plagued with crises. Moreover, crises have become more frequent in recent decades as compared with the Bretton-Woods period, although their severity and duration have not changed significantly (Bordo et al., 2001). Crises must be avoided, but the only way to make sure they do not happen is to eliminate financial innovation and development altogether, which we know is not a good prescription. Therefore, crises will still occur, and the role of policies is not to be the cause of them, but to increase resilience of financial systems and minimize their cost. 3 Of course, all these elements were absent in the global financial crisis and for this reason we need to devote more thinking to reforms. Although crises will continue to happen, we must not conclude that since crises are unavoidable, there is nothing we can do about them.
Along the same line, the Taylor rule was, obviously, used before John Taylor estimated it. Regardless causality, monetary policy and central banking have changed significantly. The movement toward granting central bank independence around the world has been a positive one. Of course, this comes with the challenge for central bankers to demonstrate that this is really a good thing, something that certainly has been questioned in some countries during the recent crisis. Although central banks were created to address problems in the banking sector, over time, their objectives moved to more general aspects such as economic development or growth. Then, since the 1980s, and with the success of the Great Moderation, central banks increasingly, and rightly so, focused on price stability. Unfortunately, financial stability, another issue at the core of central banking, was overlooked. Monetary policy has abandoned money supply and exchange rates as nominal anchors, to target directly inflation and anchoring nominal variables via inflationary expectations. To reinforce credibility and to gain legitimacy, communication has become central to the conduct of monetary policy. Many challenges remain; in particular how to incorporate the financial stability goal into policy making, but the evolution of policy making has been enormous, in particular for emerging economies. However, progress in economics has not been completely successful, and many challenges remain to make economic analysis more helpful to guide policies, and that is the issue I want to discuss next.