Such thoughts lay behind monetary policy in the early 1990s, when we were emerging from twenty or so years of high, fluctuating inflation and confidence in the new low inflation regime needed to be established. In both its communication and policy, the Riksbank prioritised inflation quite clearly before other considerations – it was quite simply necessary to be what Mervyn King referred to as an “inflation nutter” during a period of adaptation. If, at that time, the Riksbank had acted less resolutely – and there was definitely external pressure to have a more relaxed attitude towards inflation – it would have taken much longer and been considerably more difficult to establish the inflation target as the benchmark for price-setting and wage formation that it has been In recent decades. The independence of central banks – worth preserving As I have previously touched upon, a common view both historically and internationally has been to see central banks as relatively independent public institutions. This has partly to do with it being otherwise tempting for governments to finance budget deficits by printing more money. But it has also had to do with it being considered risky to use monetary policy far too actively in cyclical policy. Experience has suggested that this can lead to lastingly high and volatile inflation without any positive effects on the real economy. For these reasons, many countries have chosen to delegate monetary policy decisions to a highly independent central bank.
The papers to be presented by Luca Dedola from the European Central Bank and Óscar Jordá from the University of California-Davis are part of a very active literature that studies the determination of nominal exchange rates incorporating insights from recent developments in the theory of financial markets. On line with developments on financial markets theory, the paper to be presented by Craig Burnside shed lights on a central discussion on the exchange rate dynamics theory. Along with his coauthors they offer an explanation for the forward premium puzzle in foreign exchange markets, their analysis is also consistent with opportunities of profitable carry trade strategies. Given the importance of the nominal exchange rate for an open economy like Chile, these papers are also a very important and relevant contribution. As you can see this promise to be a very interesting conference and I invite you to engage in the discussion and seize the opportunity to learn from this very excellent group of researchers. BIS Review 104/2010  1  Finally I would like to thank Miguel Fuentes, Diego Saravia and Felipe Labbé for organizing what promises to be a very interesting workshop. Thank you. 2  BIS Review 104/2010