Let us assume that Finansinspektionen conducts a wise policy in the coming decades and succeeds in preventing one or more financial crises that would otherwise have occurred. It would be very difficult to actually prove that this was due to successful macroprudential policy – the only thing that can be observed is that no crisis has occurred. I can easily imagine that the general impression in retrospect would be that Finansinspektionen had been imagining things and tightened macroprudential policy unnecessarily. Ironically, it may be the case that the more successful macroprudential policy is, the less useful it is perceived to be. Over time, this could lead to fairly strong pressure on Finansinspektionen not to take any action. In addition, there will of course also be the common criticism that one, as in monetary policy, is “taking away the punch bowl just as the party gets going”. Moreover, it is possible that macroprudential policy measures will be perceived as more dramatic and as a larger intervention than raising the repo rate, and the pressure not to take action can thus be particularly great in this field. Macroprudential policy also needs support Just as monetary policy cannot be left alone to try to manage the risks linked to household debt and developments on the housing market, macroprudential policy cannot be left without support. I believe it is important that there is some degree of concordance between macroprudential policy and monetary policy – so that they, so to speak, do not pull in different directions, but help one another.
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.