europe. in the usa in the 1990s the unemployment rate declined. one of the reasons was that, by the nineties, the baby boomers were already well integrated into the labour market. therefore, the level of unemployment among active job seekers was low. normally search unemployment is high whenever a large cohort enters the labour market. in germany we have a situation where early retirement very often is preceded by a period of unemployment. it may thus be assumed that here the non accelerating inflation rate of unemployment is relatively high because a large cohort is close to retirement age. conversely, this rate should fall if the rules which currently encourage pre - retirement unemployment are changed. it is estimated that in germany around one fifth of total unemployment is the result of old - age including the early - retirement regulations. the range of factors which the ecb covers in its second pillar includes changes in current account balances and exchange rates. here, too, changing age structures could have a significant impact. it may be supposed that savings exceed investment during phases when a “ baby - boom ” generation has entered the workforce. consequently, a current account surplus would be “ normal ” during such a period. an opposite movement should be expected in an aging society. economic policy makers have to take these shifts in the current account into consideration. in the context of its second pillar the ecb also looks at asset prices as an indicator of monetary policy. this indicator is influenced by the age structure of the population – for instance if pensioners reduce their assets in order to maintain their level of consumption. i am sure that we will return to this subject in greater detail in the course of our conference. and i hope that we will have enough time to discuss the question whether the aging of the population influences the monetary transmission process. if a greater funded component is introduced into old - age pension systems in the future, that will certainly have repercussions on the financial system. as a rule, countries where the pension system has a greater funded component also have different financial systems than countries in which the pay - as - you - go system predominates. some commentators even refer to the complementarity between pension systems and financial systems. in turn, the structures of the financial systems are important determinants of the monetary transmission process. see, for example, d. cutler, j. poterba, l. sheiner, l. summers : an aging society : opportunity or challenge? bpea, 1990, pages 1 – 73.

primary financial statements may not accurately reflect business strategies or appropriately measure the firm ’ s underlying performance and condition. in these cases, although information about fair value can be useful in supplemental disclosures, it is questionable whether there is widespread demand for market value accounting to become the basis for the preparation of the primary financial statements. although the needs of financial statement users may vary, a critical function of financial statements is to reflect in a meaningful way underlying trends in the financial performance and condition of the firm. the application of market value accounting to business strategies where it is not appropriate, and particularly when applied on a piecemeal basis, may lead to increased volatility or fluctuation in reported results and actually obscure underlying trends or developments affecting a firm ’ s condition and performance. requiring companies to adopt market value accounting where it is not consistent with their business strategies can cause them to incur significant costs to provide information that may not reflect in a meaningful way their underlying circumstances or trends in their performance. moreover, from the standpoint of financial statement analysts and other users, having to make adjustments to remove the effects of this accounting volatility from income statements and balance sheets - - volatility that is not consistent with firm ’ s risk positions - - can also impose significant costs without offsetting benefits. these problems can be minimized by placing market values in meaningful supplemental disclosures rather than by forcing their use in the primary financial statements. such an approach would give analysts the information they need, without imposing the broader costs of having to reverse or back out the effects of artificial volatility from the primary financial statements. of course, financial statements and supplemental disclosures must be accurate and not misrepresent a firm ’ s financial circumstances - - a problem that can be minimized when financial reports are subject to thorough review by management and external auditors. federal reserve ’ s experience the federal reserve board has a long - standing interest in the quality of financial reporting. this arises from our role as the nation ’ s central bank, and as the supervisor of bank holding companies, state member banks, and the u. s. operations of foreign banking organizations ( fbos ). the federal reserve and other bank supervisors are responsible for assessing the safety and soundness of the institutions they regulate. in this regard, the federal reserve relies on off - site monitoring, on - site supervision, capital and other regulatory requirements, and policies that encourage sound risk management practices. we believe that market discipline - - supported by appropriate