4  Barro and McCleary (2003). 2  BIS Review 114/2010  argued that pre-dominantly Protestant countries in Europe grew faster than Catholic countries as a result of differences in patience and work ethic. 5 This has echoes with recent literature emphasising the role of “Asian values”, such as thrift and patience, as a driver of growth in the region. 6 Patience is also likely to have been a key factor in the evolution of financial systems. At root, banks and capital markets are simply a means of matching saving to investment. They are about realising the benefits of patience and thus growth. There is strong evidence for such effects. Financial deepening is known to be an important determinant of long-run growth. 7 Why? Efficient financial intermediation increases the returns to patience, thereby encouraging thrift and promoting growth. The impatience “gene” For every virtue there is a vice, for every ego an alter ego. So it is with patience. In Smith’s Theory of Moral Sentiments, he also spoke of a “two self” model. People had both a patient and impatient component. This double-self principle was developed by psychologists and philosophers, such as Freud and Berlin, during the 1950s and 1960s. Latterly the work of behavioural economists, such as Thaler and Shefrin, has formulated the two selves as the patient “planner” and impatient “doer”. 8 Using brain imaging, this model has recently been given neurological support.
Inflation in the euro area has proven to be much higher and more persistent than originally projected. This reflects the unprecedented series of shocks we have faced, and the fact that those shocks have led to turning points in our economic environment. Monetary policy cannot prevent the first-round effects of many of these shocks. But it can ensure that they do not become embedded. This is what the ECB is doing. We have taken major steps along the path of normalising our monetary policy, frontloading our rate increases. This signals that we are determined to bring inflation back to our medium-term target of 2% in a timely manner and ensure that inflation expectations remain well anchored. We will not let this phase of high inflation feed into economic behaviour and create a lasting inflation problem. Our monetary policy will be set with one goal in mind: to deliver on our price stability mandate. 1. Rees, D. and Rungcharoenkitkul, P. (2021), “Bottlenecks: causes and macroeconomic implications”, BIS Bulletin, No 48, Bank for International Settlements, November. 2. ECB staff have estimated that errors in our assumptions about energy prices explain around 75% of our forecast errors one-quarter ahead over the period from the start of 2021 to the first quarter of 2022. See Chahad, M., Hofmann-Drahonsky, A.-C., Meunier, B., Page, A. and Tirpák, M. (2022), “What explains recent errors in the inflation projections of Eurosystem and ECB staff?”, Economic Bulletin, Issue 3, ECB. 3. Average levels from 1 January 2022 to 23 February 2022. 4.