The better central bankers understand real and monetary macroeconomics, microeconomics, financial market economics, labour economics, industrial economics, international trade, public finance and public choice, the better equipped they are for their task. The favourite intermediary targets or policy instruments of central banks are short-term interest rates. When attempting to influence the rate of inflation by changing interest rates one needs reliable economic models. In the Swiss National Bank, we start with a definition of price stability. There is price stability as long as the annual increase in the consumer price index does not exceed 2%. We then use an inflation forecast over a period of three years. The three years correspond to the known range of  3  Casson, John J., “The Role of Business Economists in Business Planning”, http://www.findarticles.com/p/articles/ mi_m1094/is_n3_v31/ai_18481623. 4  Hirschman, Albert O., Exit, Voice and Loyalty, Cambridge Mass., 1970. 5  De Grauwe, Paul, “Central Banking as Art or Science? - Lessons from the Fed and the ECB”, in: International Finance, 5:1, 2002, p. 129. 6  Loc.cit., p. 130. BIS Review 62/2004  5  monetary policy lags. To forecast inflation, we have developed a number of state-of-the-art econometric models. The results of these models are translated in what we call ‘consensus forecast’. It shows different inflation paths as a function of alternative short-term target rates of interest. The Governing Board has to select the preferred target rate of interest (3M-CHF-LIBOR), which is implemented through daily money market operations.

There were other economists who would have preferred seeing more economic convergence between and within euro-zone member countries first, and they spoke out too. Both groups of economists did their jobs remarkably well. Today, most economists speak out in favour of labour market reform and other programmes for reform to make the euro zone work. Other economists prefer macroeconomic demand management. All of them want to help politicians to realise their legitimate economic ambitions. The economists’ papers, non-papers, reports and opinions are welcome. Economists in government work hard and their work is useful. Their professional life is fascinating. 4. Economists in business  The Occupational Outlook Handbook of the US Department of Labor contains the following description of what economists in business do: “Economists working for corporations are involved primarily in  BIS Review 62/2004  3  microeconomic issues, such as forecasting consumer demand and sales of the firm’s products. Economists working for corporations might also analyze their competitors’ growth and market share and advise their company on how to handle the competition. Other economists working for corporations monitor legislation passed by Congress, such as environmental and worker safety regulations, and assess its impact on their business. Corporations with many international branches or subsidiaries might employ economists to monitor the economic situations in countries where they do business, or to provide a risk assessment of a country into which the company might expand.”2 - This list is by no means complete but it provides a good first impression.