needs information about the policy actions and an accounting of the rationale for the policy if it is to hold the central bank accountable. in addition, it is generally agreed that markets work better with more complete information, though some worry that a continuous flow of information about the leanings of members of the policy committee can result in excessive volatility in financial markets. transparency can also contribute to policy effectiveness as well as to accountability. monetary policy works not only by setting the policy rate, but by conveying expectations to the markets about the future course of monetary policy. this may be done intentionally or unintentionally, but markets will make their own attempt to assess the future direction of policy and will try to glean whatever they can from policy statements, speeches of policy committee members, and so forth. to the extent that policymakers expect to ease or tighten in the future, conveying an expectation that policy rates will move in a given direction typically will immediately change long - term rates and asset prices in ways that support the objectives of that policy. that is, longer - term interest rates may move sooner than would otherwise be the case, in effect reducing the lags in the effect of monetary policy on aggregate demand. expectations, however, can also constrain monetary policy. if policymakers convey, perhaps unintentionally, expectations of a move at the next meeting, but policy does not in fact deliver that change, longer - term rates may reverse their earlier move. the only way to avoid surprises is, of course, always to deliver to the markets what they expect. and surprises are inevitable and desirable when the market gets it wrong. but concerns about such surprises, especially at times when financial markets are skittish, may complicate the policy decision. this tension between encouraging more effective policy by guiding private - sector expectations while, at the same time, avoiding policy being unduly affected by the very same private - sector expectations, in my view, was central to the fed's decision in january 2000 to change the way it communicated to the market. before january 2000, the fomc indicated whether policy was more likely to remain unchanged or to move in one direction or the other by its choice of a symmetrical or asymmetrical posture. thereafter, it communicated only its judgment about the balance of risks to the forecast. while the latter obviously also had implications for future policy, the new approach might be viewed as a way to guide expectations while limiting the market '

- based financing dominates. history and theory do not demonstrate that a system overwhelmingly dominated by financial markets is more efficient to promote long - term growth than a more bank - based structure. developments since 1945 prove this assertion : europe ’ s growth led to a substantial catching up with the us, keeping its different financial system. in spite of the role of capital markets in the us, smes continue to be financed mostly by banks with the significant help of guarantees provided by the us small business association to the tune of usd 30 billion per year. deeper equity markets however, constitute an unquestionable advantage to the us, notably in relation to the role of venture capital in promoting innovation. for the expansion of such an activity it is important to dispose of a deep equity market that can provide significant returns in successful ipos ( initial public offers ) that can offset losses incurred by failing risky projects. overall, it is true that at this stage, europe will benefit from a more balanced structure between market - based and bank - based financial system which cmu will help to develop. looking forward, an important step in the establishment of the cmu is the revitalization of the securitisation market. early measures proposed in the cmu action plan 8 can be conducive to capital relief for originators, thus contributing to freeing up banks ’ balance sheet and increasing lending to the real economy. these actions help monetary policy to provide the necessary accommodative stance in crisis times, particularly when interest rates are close to the zero lower bound. in addition, improved functioning of the securitisation market increases the supply of high - quality collatera 9 and expands the pool of eligible assets in the context of the ecb ’ s asset purchase programmes. cmu initiatives that promote a resilient form of financial integration by restricting fragile crossborder debt exposures can reduce the emergence of financial fragmentation in periods of crisis, which in turn will contribute to a well - functioning single monetary policy. 3. cmu fosters private risk - sharing and a more resilient financial integration cmu can lead to a more resilient emu through promoting private risk - sharing mechanisms that allow income and consumption smoothing across countries, also known as risk - sharing. risk - sharing can increase welfare by reducing sensitivity of income growth to output growth in a country. in a monetary union, risk - sharing is particularly important because monetary policy is unable to address asymmetric, country - specific shocks,