jurgen stark : the contribution of monetary policy and financial statistics to the conduct of monetary policy statement by mr jurgen stark, member of the executive board of the european central bank, at the 4th ecb conference on statistics “ a strategic vision for statistics – challenges for the next 10 years ”, frankfurt am main, 24 april 2008. * * * ladies and gentlemen : it is a great pleasure to contribute to this conference. as the executive board member responsible for economics at the ecb, i am acutely aware of the dependence of the analysis underpinning our monetary policy decisions on the quality and breadth of the available statistics. we all recall the famous aphorism – variously attributed to benjamin disraeli and mark twain – that “ there are lies, damned lies and statistics ”. i trust that our discussions during this conference will dispel the implied concern about the use of statistical information. after all, without high quality data, on what would analysis rest? in my remarks today, i would like to highlight a number of important statistical requirements for the effective conduct of monetary policy, focusing in particular on the ecb ’ s monetary analysis. developing monetary and financial statistics is of course an important responsibility of the ecb itself, so there is an element of “ keeping our own house ” in order in what i will say. at the same time, i am aware that our need for high quality statistics places a burden on reporting agents – on banks, firms and households – at a time when they already face many other challenges. monetary policy : objective and strategy my contribution today takes as its starting point the primary objective of the ecb and its single monetary policy, namely the maintenance of price stability in the euro area. in pursuit of this objective, the governing council follows its monetary policy strategy. one crucial element of the strategy is the ecb ’ s quantitative definition of price stability. i would like to first reflect briefly on some statistical issues behind our definition of price stability. in 1998, the governing council defined price stability as a year - on - year increase in the harmonised index of consumer price ( or hicp ) for the euro area of below 2 %. in 2003, the governing council confirmed this definition, while clarifying that it aimed for annual hicp inflation “ below, but close to, 2 % ” over the medium term. the hicp was chosen as the index used to define price stability because it is a state - of - theart measure of the price of households ’

and investment decisions that drive the business cycle. understanding these channels better is at the heart of the agenda to enhance the monetary analysis that is being pursued by eurosystem staff at the behest of the governing council. 3 four avenues for further research in order to deepen our monetary analysis have been identified. first, new money demand equations are being developed, which can better explain monetary developments observed over the past few years. second, the indicator properties of monetary developments for inflation are being investigated in greater detail, with a focus on the relationship over longer horizons. third, the governing council has commissioned further work on structural models of the economy that incorporate an important role for monetary and financial variables. finally, the governing council seeks tools that will aid its cross - checking of the economic and monetary analyses, which is central to the ecb ’ s monetary policy strategy. scenarios constructed using structural models are one such approach, while the integrative framework provided by the new euro area accounts is another. work on these four avenues is ongoing. our ambitious agenda not only challenges those developing the monetary analysis ; it also creates new data demands and statistical requirements. it is to those that i now turn. statistical requirements for enhancing the monetary analysis what are the statistical requirements for enhancing the monetary analysis? see “ monetary analysis in real time ”, ecb monthly bulletin october 2004 and b. fischer, et al. ( 2008 ) “ money and monetary policy : the ecb experience 1999 - 2006 ” in eds. a. beyer and l. reichlin the role of money – money and monetary policy in the twenty - first century ( ecb ). see r. adalid and c. detken ( 2007 ) “ liquidity shocks and asset price boom / bust cycles ”, ecb working paper no. 732. see j. stark “ enhancing the monetary analysis ”, speech at the conference “ the ecb and its watchers ix ”, frankfurt 7 september 2007 ( http : / / www. ecb. europa. eu / press / key / date / 2007 / html / sp070907 _ 1. en. html ). first, the availability of long runs of historical data is crucial to the development of appropriate models and tools. there is thus a vital need for long monetary time series that are consistent over time. meeting this requirement is crucial to developing a better understanding of the leading indicator properties of money for future price developments over longer horizons, and thus for constructing the policy - relevant