This practical convergence means that there is now little steam behind the question of the relative merits of the two approaches to the target, or mandate, for central banks. 6  A number of commentators have questioned the wisdom of flexible inflation targeting. For example, Eichengreen et al (2011) and Barker (2012). The first of those asserts that “the traditional separation, in which monetary policy targets price stability and regulatory policies target financial stability, and the two sets of policies operate largely independently of each other, is no longer tenable” (op. cit. p. 5). 7  The most complete analysis of the New Keynesian model as applied to monetary policy is Woodford (2003). It is no accident that in official circles the most serious questioning of the foundations of inflation targeting emanates from the Bank of Japan (BoJ) and the Bank of International Settlements (BIS). The “lost decade” has prompted an interesting series of speeches by the BoJ’s governor, Masaaki Shirakawa. And the BIS, freed from day-to-day involvement with the setting of interest rates, has long argued that monetary policy and financial policy cannot be considered separately. BIS central bankers’ speeches  3  In this, by now conventional, framework, the proper objective of monetary policy is to minimise the variability of inflation around the target rate and the variability of output (or employment) around a sustainable path consistent with stable inflation. 8 Such an objective means that the central bank is effectively choosing a trade-off between the volatility of inflation and the volatility of output.

BIS central bankers’ speeches  11  Annex: Tables and charts  10  BIS central bankers’ speeches  BIS central bankers’ speeches  11  12  BIS central bankers’ speeches  BIS central bankers’ speeches  13  14  BIS central bankers’ speeches  BIS central bankers’ speeches  15  16  BIS central bankers’ speeches  BIS central bankers’ speeches  17  References Adrian, T and H. Shin (2011), “Financial Intermediaries and Monetary Economics”, Handbook of Monetary Economics 3A pp. 601–650, Elsevier. Barker, K., (2003), “Adjusting to low inflation – issues for policy”, available at http://www.bankofengland.co.uk/publications/Documents/speeches/2003/speech190.pdf . Barker, K., (2012), “Macroeconomic policy: too much autonomy and too little coordination”, Centreforum, available at www.centreforum.org/assets/pubs/macroeconomic-policy.pdf . Bean, C., (2003), “Asset Prices, Financial Imbalances and Monetary Policy: Are Inflation Targets Enough?” in Anthony Richards and Timothy Robinson (eds.) Asset Prices and Monetary Policy, pp. 48-76. Reserve Bank of Australia: Sydney. Bean, C., M. Paustian, A. Penalver, and T. Taylor, (2010), “Monetary Policy after the Fall” In Macroeconomic Challenges: The Decade Ahead. Federal Reserve Bank of Kansas City. Bernanke, B., (2011), “The Effects of the Great Recession on Central Bank Doctrine and Practice”, remarks at the 56th Economic Conference of the Federal Reserve Bank of Boston, 18 October 2011. Bernanke, B., and M. Gertler, (1989) “Agency Costs, Net Worth, and Business Fluctuations”, American Economic Review, Vol. 79(1), pp. 14–31. Bernanke, B., and M. Gertler, (1990), “Financial Fragility and Economic Performance”, Quarterly Journal of Economics 105, pp. 87–114.