its members. ” i will quote eichengreen at length, largely because i find his analysis and assessment as persuasive as any i have encountered on this subject – which is another way of saying that for the most part i agree with him. i am particularly attracted to his dismissal of the more ambitious reform proposals, including those sponsored by some g7 governments, as unworthy of much discussion simply because “ they have not a snowball ’ s chance in hell of being implemented. they all assume a degree of intellectual consensus and political will that simply does not exist. ” eichengreen goes on to list a set of key assumptions that condition his thinking on these issues. those also bear repeating : • liberalized financial markets have compelling benefits. this is an argument about savings mobilization, and efficient allocation of investment, together with the benefits of allowing consumption smoothing and risk diversification. note that it is not a closed - minded piece of ideology, but a proposition that, despite their obvious weaknesses, markets generally do a better job of allocating resources than do governments. • international financial liberalization and growing international capital flows are largely inevitable and irreversible. at the core of the global trend towards financial liberalization lie changes in information and communications technology. this rapidly emerging and pervasive technological capability makes it more difficult to restrict the range of financial transactions in which market participants engage. as the technology becomes more pervasive, and the benefits from accessing it expand, so too the costs associated with constraints on its use must grow. moreover, it is difficult to limit international financial transactions when domestic financial transactions are being freed. given that the case for domestic capital market liberalisation is overwhelming, it follows that it will be increasingly difficult and costly to limit international financial transactions. • notwithstanding the manifest benefits of financial liberalisation, capital markets do not work perfectly ; they are characterised by information asymmetries that give rise to sharp corrections and, in the worst case, financial crises. here, eichengreen recognises that there are characteristics of financial markets that make them prone to occasional distress, to overshooting and to herd behaviour. the banking system will often be the point at which stresses associated with this behaviour come to the surface. so, however positively we view markets, history and the structure of financial markets warns us to expect periodic crises. • this instability provides a compelling argument for erecting a financial safety net, despite the moral hazard that may result. eicheng

finance must make the appointment from candidates nominated by the board. • constraints on the governor ’ s decision - making authority which are inherent in the rbnz act and in the policy targets agreement. • the monitoring of the governor ’ s performance by the board to ensure that the governor acts in a collegial manner, and has proper regard for the wide range of advice and input which is obtained from sources internal and external to the bank. • the transparency provisions which ensure a close external scrutiny of the governor ’ s decisions including, importantly, by financial markets. further, the non - executive directors have recommended some changes intended to strengthen the board ’ s scrutiny of the decision - making processes and thereby reduce further any risks inherent in the single decision - maker model. another consideration which emerged during the consideration of alternative decision - making structures related to concerns about potential conflicts of interest where external appointees are involved in monetary policy decision - making and the limited pool of available expertise and experience suited for such a task in a small country like new zealand. overall, i doubt that there are many general principles or lessons from international experience that can be applied in this area. in many cases, it seems that the formal differences between a single decision - maker and a committee structure are less obvious in practice than they are on paper. moreover, it seems that some of the more interesting approaches to committee structures, such as that of the bank of england and the riksbank, are still evolving and settling down. for that reason it may be too soon to draw firm conclusions about the preferred decision - making structures. single or multiple goals? the new zealand framework quite deliberately and explicitly directs monetary policy towards a single objective - price stability. this approach stems from an understanding that, in the medium - term, monetary policy affects only the price level ; it is not possible to engineer a higher trend rate of real growth merely from monetary expansion. the charters of some other central banks are broader, typically requiring monetary policy to place some weight on other objectives of economic policy such as growth and employment. in the new zealand case, we felt that having a single price stability objective was helpful in providing clarity of purpose in the earlier stages of a significant disinflationary process. it also supports a clear accountability framework and fits with what we think monetary policy is able to achieve. but this is not to say that we see no connection between monetary policy and real variables such as growth and employment. on the contrary, maintenance of medium - term price stability