While not establishing a statistically reliable trend, these figures provide at least tentative support to the hypothesis of an upward level shift in the equilibrium price range of oil (see Figure 2). For a central bank concerned with maintaining price stability, it is important to examine such a hypothesis in some detail. My remarks today will initially focus on a number of factors that support the equilibrium price level shift argument. I will then briefly examine to what extent information extracted from the oil market confirms the hypothesis of a persistent level shift in oil prices. Finally, I will discuss how higher oil prices affect aggregate output and inflation and consider their consequences for monetary policy with a brief reference to the current economic situation and monetary policy challenges in Switzerland. 2. Oil price level shift hypothesis  Demand and supply of oil are strongly affected by increasing global integration. Throughout the 1980s, the relationship between oil prices and economic output was characterized by a largely one-way causal effect from oil prices to economic growth. Today, the opposite dynamic appears to have become more relevant. The demand for oil and the price of oil is increasingly a function of global economic developments. In other words, an increase in the price of oil can be viewed as a consequence associated with an acceleration of global economic growth. A simple statistical calculation provides evidence of a structural break in the relationship between world GDP and the price of oil in 1995.
Ravi Menon: Monetary Authority of Singapore at forty Welcome address by Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore, at MAS 40th Anniversary Dinner, Singapore, 28 November 2011. *  *  *  Prime Minister, Lee Hsien Loong Deputy Prime Minister and Chairman MAS, Tharman Shanmugaratnam Distinguished guests, ladies and gentlemen, Staff and management of MAS are delighted to welcome you to our 40th anniversary celebrations. 1. one. An anniversary is a good time to thank all those who made the journey a successful  First, we thank the past leaders and staff of MAS 2. Economic and financial stability that Singapore has enjoyed over last 40 years is result of tireless efforts of generations of MAS officers. 3. The pioneers, led by our first Chairman, Mr Hon Sui Sen, and first Managing Director, Michael Wong Pak Shong, laid the foundations for an integrated central bank and financial regulator while navigating a turbulent global environment – the collapse of Bretton Woods, global recession, and double-digit inflation. 4. With Dr Goh Keng Swee as Chairman at the start of the 1980s and Mr Lim Kim San and Mr Yong Pung How as Managing Directors, MAS adopted the exchange rate as the principal tool of monetary policy, at a time when the conventional tools were monetary aggregates and interest rates. 5.