But, even in Europe, where the influence of the so-called “new economy” is more modest, the rise in stock prices has also been significant;  ·  second, these changes have probably influenced private spending more than past asset prices movements did because of the more widespread share ownership observed in a number of industrialised countries. As far as France is concerned, market capitalisation as a percentage of GDP increased approximately fourfold between 1990 and 2000 (28% to 110.5%) and we have some evidence that the share of Households’ equity holdings in financial assets has also risen. All of these developments have recently raised the issue of whether monetary policy should react to financial asset prices, and more generally to asset prices. The motivation is two-fold: not only could the large swings, misalignments or even bubbles, on asset prices endanger price stability, which is the main objective of most central banks, but also they could impinge upon financial stability, which is an other important goal of central banks. Let me now develop these two points. 1. Implications for monetary policy  Transmission channels of monetary policy The role asset prices may play in the transmission mechanism of monetary policy is well known theoretically, although quite difficult to characterise empirically. Monetary policy mainly controls the interbank overnight rate, which is not directly relevant for any material economic decision. The way to which monetary policy affects the real economy is when it impacts on relevant financial prices, i.e.

So, what are the possible policy implications of these recent patterns or trends on financial markets? My opinion is that financial authorities might reflect on some ways to foster behavioral diversity in financial markets. As we have just seen before, some specific factors, such as short-termism, mimetic behaviour etc… have tended to make “contrarians” less pro-active on financial markets. As a consequence, in order to safeguard the smooth functioning of the markets, the diversity of participants’ behaviours must be protected or even reinforced. This necessary diversity should logically reflect natural differences in time horizons, strategies and reaction functions of market players. On this point, I would like to explore amongst many others three possible avenues for future action for both monetary or financial authorities and the financial industry. First avenue: Strengthening the continuing efforts aiming at market transparency Experience shows that uncertainty and incomplete information are determining factors in mimetic behaviour. These shortfalls in market transparency make mimetic behaviour seem rational to agents, who prefer to follow bigger participants, who are thought to be better informed, rather than develop their own analysis. Therefore, strengthening transparency continues to be the priority. In the same vein, attention should be paid to expand the skills and competencies required by the analysis of a more detailed and complex information. Transparency is useless if only a limited number of experts are able to deal with it. One of the objectives of transparency is to enable better differentiation of borrower creditworthiness.