, and his insights can lead us to the conclusion that the value of stabilizing policy, mainly by the central banks, is not great. but there is also widespread economic literature that proves otherwise, as well as insights that are specific to israel. these insights have become clearer to me in recent months, since i took on the position of bank of israel governor and saw how the bank of israel ’ s measures, in their various forms, have contributed to the economy ’ s growth and its resilience to shocks. first, let us mention the objectives of the bank of israel, according to the law : to maintain price stability, as its central goal ; to support economic policy, especially growth, employment and reducing social gaps ; 1 / 4 bis central bankers'speeches to support the stability and orderly activity of the financial system. it is common in the economic literature to assume that one of the central bank ’ s roles is to moderate the volatility of the business cycle, since the widespread assumption is that this volatility is undesirable among consumers and firms. and in fact, since the mid - 1980s, there has been a decline in the volatility of business cycles in the advanced economies, which has been reflected in gdp, production, employment, and more. the success in reducing the volatility is mostly attributed to the policies of the central banks, which, thanks their independence, can act in the interest of macroeconomic stability. if so, it is worth examining whether the effort to stabilize economic activity, which has in fact borne fruit in recent decades, is actually important and worthwhile. the economist robert lucas examined this question in 1987 by estimating the negative impact to well - being that results from volatility in consumption, assuming that potential consumption increases at a fixed rate while actual consumption is volatile. lucas ’ s model shows that the consumption value that individuals will agree to pay for completely cancelling volatility — for convenience, let ’ s call it the “ insurance premium for nonvolatile consumption " — is near zero. this means that the value to the consumer of smoothing consumption is negligible, and we can theoretically conclude that there is no tremendous value to a stabilizing policy. this leads to a similar potential interpretation regarding the importance of the central banks. is this really true? where does the gap between the intuitive notion that volatility should be moderated and lucas ’ s conclusion come from? the answer has to do with three

with the republic of turkey one could go back to the proclamation of the new state as a republic, last century, and even more, centuries of ties between the romanian principalities and the ottoman empire. i also like to notice the connection between our two central banks. in the national bank of romania ’ s archives there are letters, exchanged between governor mitita constantinescu and governor salahattin cam, regarding the organization of a conference for the governors of the central banks in the balkanic coalition, in november 1937, in ankara. now, both central banks are members of the club of governors of the black sea area. regarding sweden i will grasp your attention with a historical moment that incidentally connects sweden with bucharest and the ottoman empire. one of bucharest ’ s landmarks, the coltei tower ( part of the coltei hospital which you can see across the boulevard ) has been built in the early xviii century by the swedish soldiers, during king charles xii retreat to adrianople after his failed campaign in russia. bis central bankers ’ speeches i will end now my brief journey into history, which has not been nor exhaustive, not even relevant, and get back to our conference topic. during the debate one should not forget that the size of the economies and the development level is different in these three countries. for example in a list compiled by the international monetary fund for the year 2012, turkey ranks 17th, with a nominal gdp of 795 billion dollars, while sweden ranks 22th, with a nominal gdp of 525 billion dollars ( romania is 56th, with 170 billion dollars ). gdp / capita is also rather different. i do hope that this conference will elicit a lively debate. i believe that we have much to learn from the swedish and turkish experience since they have been market economies for a longer period of time compared to romania. i kindly invite their excellences the ambassadors of turkey and sweden to address the audience and to introduce their speakers. the debate will be moderated by mr. valentin lazea, the national bank of romania chief economist. thank you for attending this conference, which i do hope will turn out to be a very successful one. bis central bankers ’ speeches