; first for m1, and eventually for the monetary base. in 1978, the snb abandoned its monetary target for a short period in favor of a nominal exchange rate target. 2 during the second half of the 1990s, the monetary base became instable. the snb faced increasing difficulty using a money target for mo, let alone to communicate through them. finally, the snb decided to adopt an altogether new monetary framework in an effort to increase the clarity, transparency, and flexibility of the conduct of its monetary policy. the new concept, introduced in january 2000, is based on three elements : an explicit definition of price stability, an inflation forecast as the main indicator for policy decisions, and a range for the 3 - month libor as the operative target. in contrast to the ecb ’ s two - pillar strategy, the snb decided at the time to adopt an integrated approach. for the purpose of today's discussion, i would like to highlight two important elements of the snb ’ s monetary framework. first, communication considerations were an important element in the design of the new framework. clearly inspired by the early inflation targeters, a definition of price stability and a quarterly inflation forecast became the primary communication tools with regard to monetary policy. these were considered to be clearer than the alternative of attributing a specific role to monetary aggregates. in other words, the two pillar model of the ecb was rejected primarily on the grounds of communication considerations. second, the new monetary framework was deliberately designed to allow sufficient room for judgment and flexibility in the conduct of policy. the inflation forecast as the main indicator for policy decisions is derived from a " portfolio " of models and indicators. some of these models contain monetary aggregates ; others don ’ t. the weights assigned to different models and indicators are allowed to vary over time as their reliability and applicability may also vary across different economic situations. empirical studies backed the " portfolio of models " approach. empirical evidence drawing on six years of swiss data suggests strongly that combining inflation forecasts from different models and specifications improve the forecasting accuracy of the snb ’ s inflation forecasts. 3 of course, the snb does not claim to have solved the fundamental problem of linking monetary and non - monetary analyses. the governing board feels strongly, however, that there are significant advantages in aggregating the information from our different models and indicators in an internal process and subsequently publish a single snb inflation forecast. let me simply mention the most obvious

thomas jordan : globalisation and financial markets – challenges and opportunities summary of a speech by mr thomas jordan, member of the governing board of the swiss national bank, at eth alumni engineering & management, zurich, 13 november 2007. the complete speech can be found in german on the swiss national bank ’ s website ( www. snb. ch ). * * * in the past few years, globalisation of financial markets has attained a remarkable level, exceeding that of goods markets in a number of respects. the future is likely to see considerable further development in this direction. in principle, the effects of financial market globalisation are positive. it leads to a higher level of efficiency in the international allocation of capital and allows for better risk distribution in investments. however, the globalisation of financial markets in switzerland means that more companies are being taken over by foreign investors, while new risks arise in the case of investments abroad – risks that are difficult to quantify. the globalisation of financial markets confronts monetary policy with a dual challenge. on the one hand, it changes the way in which the monetary policy transmission mechanism works, and the interpretation of economic models becomes more difficult. on the other hand, external shocks have a greater impact on both domestic financial markets and the domestic economy. consequently, globalisation of financial markets results in greater uncertainty in monetary policy and increases the necessity of monetary policy stabilisation by central banks. overall, switzerland – a small open economy with a highly developed financial sector – is in a position to derive particularly significant benefits from the globalisation of financial markets. it is important to take advantage of these opportunities. protectionism when foreigners acquire companies and excessive regulation of foreign investment should be avoided. rather, the sale of swiss companies below their real value can be avoided through innovation, flexibility and good management, and excessive risks of foreign investments can be limited through more personal responsibility on the part of investors.