very similar to porter ’ s approach was used by the bundesbank prior to the formation of the euro area and is used by the european central bank today. my own view is that a reliable macroeconomic forecast requires looking at many different types of economic data and considering a variety of forecasting models ; any single model or approach is likely to go off the rails at one time or another. for this reason, i am personally attracted to factor models, which summarize large amounts of data ( as in bernanke and boivin, 2003 ), and to model averaging, along with more structured analyses. interesting alternative models, like porter ’ s p - star model, are useful because they give yet another perspective on the likely evolution of a critical macroeconomic variable and thus provide a check on other forecasts that one might have in hand. because good forecasts are so crucial to good monetary policy, i hope and expect to see a great deal more work exploring the robustness of alternative forecasting methods. the third and final research area that i would like to highlight is the analysis of how the public forms its expectations, and of the effects of various expectations formation mechanisms on macroeconomic dynamics. for example, a rich recent literature on learning and macroeconomics has emphasized that actual inflation and inflation expectations may to some degree evolve independently, and that effective monetary policy stabilizes inflation expectations as well as inflation itself ( orphanides and williams, 2003 ). peter tinsley, in a series of papers with sharon kozicki, has explored this theme in great detail. for example, kozicki and tinsley ( 2001 ) show that it is far easier to make sense of the term structure of treasury yields if one assumes that expectations about long - run inflation adjust in a reasonable adaptive manner. in a paper presented at a recent conference at the federal reserve bank of san francisco, kozicki and tinsley ( 2003 ) develop an empirical model of the economy under the assumptions that the fed ’ s implicit inflation target is subject to permanent shocks and that the public learns about the fed ’ s target over time. although simple, their model allows for a much richer and realistic description of the evolution of monetary policy and the economy. for example, their approach gives empirical content to the idea of imperfect monetary policy credibility ; in their model, monetary policy is credible when private expectations of long - run inflation tend to align closely with the central bank ’ s true underlying inflation target. their model also illustrates clearly the benefits

comprising of state level bankers committee ( slbc ) at the apex which is ably supported by the lead district managers ( ldms ) at the district level. financial literacy centres organise outdoor literacy camps which are spread over a period of three months and delivered in three phases wherein along with creating awareness, accounts are also opened in the literacy camps. the program has been received well on the ground as an integrated approach of financial inclusion through creating awareness and providing access simultaneously. in order to ensure consistency in the messages reaching the target audience of financially excluded people during the financial literacy camps, we have issued comprehensive financial literacy material containing a financial literacy guide, financial diary and a set of 16 posters which contain very simple messages of how to save. for instance, we are a nation of tea drinkers. so we just explain graphically that everyone can drink two cups of tea less! walk into a bank walk into prosperity and so on and so forth. conclusion while it is important to begin teaching financial skills at school level, achieving and maintaining financial know - how is a lifelong undertaking. the types of financial decisions that people have to make vary through the course of their lives, and thus we are trying to ensure that access to financial education is readily available at all stages of life with the help of other stakeholders. moreover, relevant, accurate, and reliable financial information must be readily available to consumers at the time they are making their decisions. through financial education, we try to provide individuals with the knowledge and skills they need to make better choices about finances. through consumer protection, we can safeguard individuals against harmful practices and bad information that lead to poor financial choices. accomplishing these two goals we believe will result in economic empowerment for all concerned. while a number of measures have been taken and are being taken in india, given the enormity of the task, a lot of ground still needs to be covered. apart from the government and the regulatory bodies, there is a need for involving the civil society and all other stakeholders in spreading financial literacy. the widespread existence of financial illiteracy indicates that we need to do a lot more. there is a lot of skepticism on whether financial literacy actually leads to changes in behaviour and some recent papers which suggest that this does not and it is the classic conundrum of being able to take the horse to the water but not being able to make him drink! bilal zia our world bank researcher and colleague and i discussed this thoroughly at dinner and we concluded that the trick vests