the rule prescriptions. the price index used by john in the carnegie rochester paper was the gdp price deflator. other researchers have used the inflation measure based on the consumer price index ( cpi ). over the past fifteen years, the federal reserve has emphasized the inflation rate as measured by changes in the price index for personal consumption expenditures ( pce ). many researchers have also explored the use of core price indexes, which exclude the volatile food and energy components, as better predictors of future inflation or as more robust indicators of the sticky prices that some theories say should be the targets of policy. to be sure, over long periods, most of these measures behave very similarly. but policy is made in the here and now, and the various indexes can diverge significantly for long stretches, potentially providing different signals for the appropriate course of monetary policy. second, the implementation of the taylor rule and other related rules requires determining the level of the equilibrium real interest rate and the level of potential output ; neither of them are observable variables, and both must be inferred from other information. john used 2 percent as a rough guess as to the real federal funds rate that would be consistent with the economy producing at its potential. but the equilibrium level of the real federal funds rate probably varies over time because it depends on factors such as the growth rate of potential output, fiscal policy, and the willingness of savers to supply credit to households and businesses. inaccurate estimates of this rate will mislead policymakers about the policy stance required to achieve full employment. in a similar vein, real - time estimates of potential output can be derived in a number of ways and – as shown by orphanides ( 2003 ) and others – they are subject to large and persistent errors. if policymakers inadvertently rely on flawed estimates, they will encounter persistent problems in achieving their inflation objective. the third limitation of using simple rules for monetary policymaking stems from the fact that, by their nature, simple rules involve only a small number of variables. however, the state of a complex economy like that of the united states cannot be fully captured by any small set of summary statistics. moreover, policy is best made looking forward, that is, on the basis of projections of how inflation and economic activity may evolve. lagged or current values of the small set of variables used in a given simple rule may not provide a sufficient guide to future economic developments, especially in periods of rapid or unusual change. for these reasons,

klaas knot : high debt and financial stress - implications for asian financial stability speech ( online ) by mr klaas knot, president of the netherlands bank and chair of financial stability board, at the asean + 3 economic cooperation and financial stability forum, kanazawa, 5 december 2023. * * * thank you for inviting me to speak today. i am sorry that i cannot be there in person with you, as i was unable to travel from the cop28 proceedings, where i am today, to kanazawa in time. nevertheless, i am grateful to be able to share a few words with you on a theme that aligns so closely with the mandate of the fsb : safeguarding growth and stability in a complex world. a resilient and stable financial system is indispensable to sustaining economic growth, particularly in the current environment. this is at the core of the fsb's mandate. as the global financial stability watchdog, the fsb is responsible for assessing vulnerabilities affecting the global financial system. in addition, the fsb identifies and reviews the regulatory and supervisory actions needed to address these vulnerabilities. so how do we go about that? to start with, our surveillance framework aims to proactively identify vulnerabilities and provides a global, cross - border, and crosssectoral perspective on existing vulnerabilities. this framework draws on the collective perspective of the broader fsb membership. but that perspective can only take us so far in understanding and responding to global vulnerabilities. indeed, the global issues of today require coordinated responses, but this does not necessarily mean one size fits all. regional perspectives matter. to gain a truly global perspective, it is important for us to incorporate the experience and intelligence of emerging market economies ( emes ) and also look beyond our g20 membership. our regional consultative groups are one way we do this. they provide us with a richer and more detailed regional perspective. one which we appreciate ever more during times like the present when financial and macroeconomic uncertainty are elevated. last week our regional consultative group for asia met in hong kong. members discussed global and regional financial market developments and their impact on asian economies. a key theme was rising government indebtedness and financial stability risks linked to the sovereign - bank nexus. i note that amro's financial stability report raises many of the themes discussed by our regional group, including elevated private and public nonfinancial