Finally, this summer we started a new Graduate Research Programme in which students are expected to pursue part of their dissertation work here at our headquarters, on topics that are relevant from the viewpoint of ECB policies. One such student, Petra Geraats, will tomorrow present her work at this conference. After all, as an independent pan-European institution, the ECB is, in the first place, accountable to the public at large, not to the limited circle of academic economists. I should imagine that the answer is obvious to most of you. Let me nevertheless expand somewhat on the most important reason, and this relates to what Alan Blinder, who will be the speaker at tonight s dinner, called the large, and sometimes unexploited, potential gains from trade in ideas between practitioners and academics.
Central banks are among the most intensive users of economic research.
It is therefore of utmost importance that the ECB should continuously update its knowledge of and expertise in the most recent theoretical and empirical research findings. Just as most firms need to update regularly their computer and software systems in order to remain competitive, a central bank needs to ensure that it understands and can implement recent economic research in order to achieve its primary goal of price stability in the most efficient way. Of course, just as most firms would not abandon their old time-honoured systems for new, untested ones without gathering evidence of their benefits and reliability, central banks need to be very cautious about jumping on the bandwagon of any new paradigm that academic researchers or other observers may provide. We do not need reminding that it was the revolution in rational expectations and the results concerning the time inconsistency of optimal policies, together with the experience of the great inflation of the 1960s and 1970s and its associated costs, that contributed to a wave of changes in central bank charters based on the principle of independence and a clear focus on price stability. These principles also represent the foundations of the Treaty on European Union, which established the European System of Central Banks.