Christian Noyer: Does money matter? A European perspective Speech by Mr Christian Noyer, Governor of the Bank of France, at the 4th ECB Central Banking Conference “The role of money: money and monetary policy in the twenty-first century”, Frankfurt am Main, 9 November 2006. *  *  *  It is a great pleasure and honour for me to take part in this Central Banking Conference. My communication will be organised as follows: I will first review some stylized facts about money and inflation that show that money still matters; second, I will relate these stylised facts to the two-pillar monetary policy strategy of the Eurosystem. I will conclude my presentation by addressing some interesting challenges we face in implementing our monetary analysis. Some stylized facts about money and inflation Let me start with a well known paradox which can be articulated in three propositions: first, price stability is the objective of all Central Banks; second, as Milton Friedman put it "inflation is always and everywhere a monetary phenomenon"; and third, nevertheless, in most countries, money has little or no part in the design or implementation of monetary policy. There is, of course, one noticeable exception: the euro area. Before getting into more details about our approach, I would like to mention two reasons why I think money, as such, remains an essential component for the design and implementation of monetary policy. •  First, money is still of direct relevance to monetary policy in exceptional circumstances: either strong (or hyper) inflation or deflation.
This is precisely the aim of this conference. I thank you for your attention. BIS Review 108/2006  3