, to offset a previous undershooting of the inflation target by overshooting it for some period of time, or vice versa. in reality, such efforts, represented, for example, by romantic notions of targeting average inflation, can get out of hand. as for the conduct of monetary policy in the future, i think we need to get back to some of the original ideas about inflation forecast targeting. in central banks, we will have to rethink what we mean by " inflation " and how to assess whether imbalances are being generated in the economy that may eventually manifest themselves in inflation or deflation. we need to focus more on the inflationary or deflationary potential arising from medium and long - term fundamentals, not just on estimates of what inflation will look like in two years'time in a forecast generated by a macroeconomic model of one type or another. for this reason, too, we will have to rehabilitate the quantities – money, credit, debt – and estimate the effects of changes in them in the longer run. furthermore, we must introduce into our monetary policy frameworks ways of systematically identifying and reflecting structural changes related to the functioning of the labour market under the influence of demographic change, to globalisation or deglobalisation tendencies, to society's preferences regarding private and public debt, to the response of economic policy to climate risks, and so on. to this end, we also need to begin to view macroeconomics as a social science again, that is, not to be ashamed of the historical term " political economy ". i would like to end by thanking all my current or previous colleagues here at the faculty of economics, at universities in other countries, in international organisations and at the cnb for carrying on the torch of the ostrava monetary school which we started to build here in the early 1990s. i wish you a successful conference. * * * i would like to thank jakub matj, adviser to the bank board of the czech national bank, for valuable comments and suggestions. any errors or omissions are my responsibility. 5 / 5 bis - central bankers'speeches

is as operationalised as inflation targeting. after all, back in 1978, the u. s. economic historian charles kindleberger, in his now classic book “ manias, panics, and crashes : a history of financial crises ”, pointed out that financial upheavals had virtually always been preceded by credit booms, property price and asset price booms and increased leverage in the financial system. all these are, in a sense, monetary phenomena. so why couldn ’ t we go further here as well? the second constraint is that smaller economies, both emerging and developed ones, are quite often in the position not only of monetary - policy takers, but also of regulatory - takers. so, they have to face the consequences of regulatory debates and decisions made by “ big guys ” somewhere else – debates and decisions they can influence only to some extent, if at all. and the emphasis in the world debate is now being put more on regulation on the micro level and less on these big questions i am discussing, despite the hard work of michael woodford and others here. i understand that micro - regulation is easier to create and to explain to the public, and sometimes also easier to implement. but it can also have faster adverse impacts. an example from europe – the harmonisation of deposit guarantee schemes ( dgs ) within the bis central bankers ’ speeches eu. it is generally a brilliant idea to have single dgs rules in the single market, but in the czech republic it has led to the abolition of the previous well - established practice of copayment when a depositor received an insured deposit from a failed financial institution. our practice was 10 % co - payment, so that depositors never got back 100 % of their insured deposits. the harmonised dgs rules established a different unified practice – deposits are insured up to 100 % of the equivalent of 100, 000 euros. this, of course, means a bigger incentive for moral hazard behaviour on the part of depositors. in the czech republic, depositors very soon started searching for higher interest rates, or higher yields, in smaller “ saving unions ” with inherently riskier business models, as these institutions are also covered by the dgs and suddenly became to a given limit riskless for savers due to the disappearance of co - payment. some of these institutions had to leave the market recently, eating up large sums from the pre - paid funds of the domestic dgs. i ’ m fairly sure