, even on occasions when there was no change in policy. by then, the move toward greater transparency was fully embraced by chairman greenspan, who had once prided himself on " mumbling with great incoherence. " 3 there were two primary reasons for this change. first, it was thought that greater transparency would demonstrate the fed's accountability to the public and safeguard its political independence. second, there was a growing appreciation in the economics profession that clarity about policy could improve macroeconomic outcomes. expectations became a focal point in academic and policy circles with the emergence of new keynesian models in the 1990s as a framework for monetary policy. in these models, aligning the expectations of decisionmakers in the private sector with those of policymakers produced superior economic outcomes. 4 mike woodford, one of the developers of the new keynesian model, put it this way : " not only do expectations about policy matter, but... very little else matters " ( woodford, 2005, p. 402 ). communicating a policy strategy and following through on it increased the credibility of 2 / 6 bis - central bankers'speeches the central bank and, therefore, its ability to steer expectations and the economy. clear communication also helped stabilize the economy and keep inflation closer to target because, when the fed clearly articulated a reaction function, financial markets would be able to anticipate the likely future course of monetary policy and help the central bank do its work by affecting long - term rates and other asset prices. during the tenure of chairman bernanke, there was another burst of innovation in the way monetary policy was communicated. in 2007, the first sep was published to convey systematically the economic outlook of fomc participants. in 2011, chairman bernanke started holding press conferences after every other fomc meeting. in 2012, the fed adopted an explicit inflation target of 2 percent and started publishing individual fomc participants'views on the appropriate future path of the federal funds rate, now famously known as the " dot plot. " 5 during these years, loretta, in her capacity as the research director at the federal reserve bank of philadelphia, contributed to ongoing work on communications, in collaboration with policymakers and federal reserve board staff. of course, this was an extraordinary time for monetary policy, as interest rates in most advanced economies were close to zero following the global financial crisis. the fomc employed forward guidance - explicit communication about the future path of the policy rate - as a key tool to deal

other jurisdictions to revisit how supervision and regulation, including capital regulation, could have better contained that risk in both the bank and nonbank sectors. that is why capital levels today are strong. while we have learned from and adapted to the lessons from the global financial crisis, this experience underscores the need for humility and continued vigilance about the risks we may not fully appreciate today. what bank capital is and isn ’ t capital regulation — requiring a bank to operate with what is deemed to be an adequate level of equity based on its asset size and its risks — is a useful tool to strengthen the incentives for banks to lend safely and prudently. first, i ’ ll begin with what capital is — essentially shareholder equity in the bank. people sometimes use the shorthand of banks “ holding capital ” when speaking of capital see gorton and metrick ( 2012 ) for a discussion of the role of repo markets during the crisis ; he and xiong ( 2012 ) for a theoretical treatment of the risks posed by short - term wholesale funding ; and barr ( 2012 ) and duffie ( 2019 ) for retrospectives. - 5requirements ; however, it ’ s helpful to remember that capital is not an asset to be held, reserves to be set aside, or money in a vault ; rather, it is the way, along with debt, that banks fund loans and other assets. without adequate capital, banks can ’ t lend. higher levels of capital mean that a bank ’ s managers and shareholders have more “ skin in the game ” — and have incentives to prudently manage their risks — because they bear more of the risk of the bank ’ s activities. next, let me speak to how capital and debt work together to fund a firm ’ s operations. in theory, companies should be indifferent to the mix of equity and debt they use to fund themselves, since the creditors of a safer firm will lend to it at lower rates and shareholders of a safer firm will accept a lower return on their investment. 9 that may not fully hold for banks because insured depositors are made risk - insensitive through deposit insurance and other creditors may provide lower cost funding if they believe the government may bail out banks in distress. 10 forcing banks to fund more of their activities with equity, instead of debt, could raise the private costs of funding to the bank, and cause banks to pass those higher costs of credit to consumers. these considerations must be balanced against the