i tried to mention briefly, and perhaps of others i forgot. and it will be up to president axel weber at the end, to draw the conclusions. but let me make just one final remark. financial innovation brings a lot of progress and should be welcome in principle. it is also a constant challenge for central bankers. good knowledge of microeconomic behaviour is of prime importance in order to better cope with the increased uncertainties and the new types of risks they bring about. this in turn is a challenge i am sure this conference will endeavour to rise to. references • angeloni i., a. kashyap and b. mojon ( eds ) ( 2003 ), monetary policy transmission in the euro area, cambridge university press. • banque de france ( 2007 ), financial stability review, special issue on hedge funds, 10, banque de france, april. • bis ( 1994 ), macroeconomic and monetary policy issues raised by the growth of derivatives markets, cgfs – monetary policy ( hannoun report ), 4, november. • campbell j. r. and z. hercowitz ( 2005 ), “ the role of collateralized household debt in macroeconomic stabilization ”, nber working paper series, 11330, may. • cecchetti s., a. flores - lagunes and s. krause ( 2006 ), “ assessing the sources of change in the volatility of real growth ”, nber working paper series, 11946, january. • dynan k. e., d. w. elmendorf and d. e. sichel ( 2006 ), “ can financial innovation help to explain the reduced volatility of economic growth? ”, journal of monetary economics, 53, pp 123 - 150. • gerardi k., h. rosen and p. willen ( 2007 ), “ do households benefit from deregulation and innovation? the case of the mortgage market, nber working paper series, 12967, march. imf, 2006 • hirtle b. ( 2007 ) : “ credit derivatives and bank credit supply ”, federal reserve bank of new york, staff reports, 276, february. • imf ( 2006 ), “ how do financial systems affect economic cycles? ” world economic outlook, chap. 4, pp 105 - 138, september. • jermann u., v. quadrini ( 2007 ), “ financial innovation and

, theorize them and reduce them to logical relationships and to models of how economic systems work, from which they draw indications for the conduct of business and for the action of the public authorities. towards the end of the nineteenth century the role of credit and banking and, more generally, of finance emerged in all its importance. the separation, the real and logical distinction, between economic agents who save and those who use savings or make investments by borrowing capital has enormous implications not only for the expansion of economic activity but also for the stability of the growth process, both within individual economies and across economic systems. keynes fully understood these changes and derived revolutionary economic theories from them, as well as setting out their far - reaching implications for policy. his genius is to be seen in the economic consequences of the peace, which, it gives me pleasure to recall, was immediately translated into italian by the milanese publisher treves. keynes foresaw the devastating effects of the treaty of versailles on the european economy. he envisaged the losses suffered by germany and russia being a source of major political instability in europe. he made a fierce attack on the work of president wilson, the french president and the british prime minister. he examined the advisability of partially or completely cancelling war debts that had become unbearable for the smaller countries, and analyzed the dire consequences that application of the peace treaty would have for international trade and the prosperity of some regions. in the background, there seems to emerge a positive vision of economic relations among european countries along the general lines of what would take shape in the design of the european community. in a tract on monetary reform, which was also promptly translated into italian by piero sraffa, keynes delineated a new and different role for monetary policy. the objective of the banks of issue, which had developed predominantly in the nineteenth century and the early decades of the twentieth, was basically reduced to maintaining the gold parity. stressing the powerful repercussions of inflation and deflation on the orderly working of the economy, prosperity, growth and employment, keynes indicated the stabilization of the price level in terms of fiduciary money as the objective of monetary policy. he advocated the abandonment of the gold standard, which he called a “ barbarous relic ”. several years later, in his criticism of britain ’ s return to the gold standard, he reiterated his objections to restoring the pre - war parity, or at any rate to setting an exchange rate well above the