But since there is no unique “European Social Model”, I will then explore how differences in economic institutions, reflecting different cultural values and social models, may explain the divergence in the growth performance of European countries. Finally, I will focus on the other important dimension of  BIS Review 43/2007  1  economic performance and a central policy objective: price stability. I will demonstrate the crucial role of the institutional frameworks for central banking and fiscal policy implementation in ensuring the preservation of price stability and the sustainability of economic growth. II. Economic performance, markets, institutions and values: a simple conceptual framework  Before addressing the issues I have raised, it will be useful to define the various concepts more precisely and to specify a simple framework that describes their likely relationships and potential effects. Needless to say, the aim is not to formulate a comprehensive theory but to sketch out a conceptual structure that can help organise our thinking and analysis. This is illustrated in slide 3. The economic performance of a country or economic area will be measured by its trend rate of economic growth and its ability to preserve price stability. These indicators of macroeconomic performance are the aggregate outcome of market mechanisms and forces and of the effects of economic and monetary policies. Economic institutions, as well as other types of institutions (e.g. legal) underpin the functioning of product, labour capital and money markets.

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