. there can be no effective cooperation, however, without an adequate knowledge of the key features of different components of the financial system, and of their interactions. it is in this spirit that banca d ’ italia has taken the initiative to organize today ’ s seminar, with the aim of better understanding the characteristics of this industry and its implications for the financial system in europe and in italy. for banca d ’ italia, it is an important opportunity to deepen our knowledge of this subject, in view of its relevance for the bank ’ s institutional duties, as a member of the eurosystem and as the authority for banking and financial supervision in italy : we have, therefore, chosen to specifically focus the seminar on issues pertaining to monetary policy and banking supervision. a cursory look at the program should be sufficient to suggest that islamic finance and its interactions with conventional financial practices are a source of numerous intriguing questions. i am therefore confident that the subject will stimulate the interest of participants in today ’ s seminar, and most grateful to the highly qualified representatives from various monetary and banking authorities, international institutions, and academia who have accepted to join the three panels. i mentioned the importance of policy cooperation for the safeguard of a sound global financial system. dr. zeti akhtar aziz, the governor of bank negara malaysia, who has kindly accepted to be the keynote speaker of today ’ s seminar, is an outstanding example of a civil servant who has put international cooperation at the center of her professional activity, throughout her distinguished career : she has, in this respect, chaired the emeap ’ s taskforce on “ regional cooperation among central banks in asia ” and is currently chairperson of the bis asian consultative group. an accomplished economist, she is also one of the leading experts in islamic finance, having played a key role in the establishment of the islamic financial services board, of which she was later council chairperson in 2007. unfortunately, official engagements with the malaysian government, which were set only in the last few days, have prevented dr. zeti akhtar aziz from traveling to europe for this seminar. while she cannot be physically with us today, she has nevertheless made a point of participating in the event, and has sent us a video recording of her address, which we are now going to show. let me therefore leave the “ virtual ” floor to dr. akhtar aziz, looking forward to her address, and to the interesting sessions which will unfold during the day.

of the fed's price stability range. i see no particular need to clarify the relationship between the treasury and the federal reserve in the united states - already there is agreement that the treasury should be the only agency that comments on currency values, and that the fed should be the only agency that comments on monetary policy - but added demarcations can never hurt. another advantage would be that inflation targeting could assist in clarifying roles. when the chairman testifies on the monetary policy report, most of the questions involve an incredibly broad range of topics - fiscal policy, tax policy, entitlement spending issues, trade issues, and wage distribution questions. many of these have little to do with the fed's direct areas of responsibility. i can see a democratic effectiveness argument for rerouting these questions back to the area of direct federal reserve responsibility, and discussion of how to implement inflation targeting might well do that. these discussions might also make it clear that price stability - not all these other matters - is the primary economic outcome for which the fed is responsible. as for the disadvantages, the most significant seems to be explaining why the fed is specifically delineating only one of its three goals. a modern - day macroeconomist would have no trouble in understanding why the fed would put a target band on inflation but not on unemployment and not on long - term interest rates. in modern - day macroeconomics, inflation is a policy choice variable - there is essentially no long - run tradeoff between inflation and unemployment, and it is up to monetary policy to choose the long - run rate of inflation. zero inflation, or close to zero depending on measurement error and other technical details, is as good as any other choice in promoting ultimate macroeconomic goals such as full employment and long - term economic growth. keeping inflation close to zero has the further advantage of limiting the microeconomic costs and tax distortions caused by inflation. hence a target zone for price stability fits perfectly into the standard macro model. but that's not true for the other parts of the fed's mandate. were the fed, or the congress, to set a target bound on the unemployment rate, that bound might not be consistent with the so - called natural, or non - inflationary, rate of unemployment. were the target band, say, below the natural rate, the fed would be forced to follow policies likely to lead to accelerating inflation. similarly, a target band for long - term interest rates below the equilibrium