for the transportation and processing of paper. we are involved in several pilot studies of ecp, including one which we hope will include all depository institutions in the whole state of montana. montana has small banks widely dispersed over great distances. it seems like the right place to see whether, if virtually all the institutions participate, it would be cheaper and more satisfactory to send images electronically rather than to move paper over thousands of miles. like others who have been studying the business case for ecp and imaging, we believe the jury is still out. it is not clear that moving the whole national check processing system to ecp ( with or without imaging ) would provide net societal benefits even if the willingness and resources to do it could be found. so you will see us working hard, in collaboration with others in the industry, to explore, in practical ways, the potential advantages and disadvantages of ecp. you will also see us working hard, in collaboration with nacha and others, to improve ach service, make it more user friendly and increase its use. you will see us trying, through surveys, focus groups and other tools, to learn more about how consumers and businesses use different types of retail payments and how they think about them. as we have worked on positioning the fed to help move the nation to the payments system of the future, we realized that many of our assumptions about the composition and use of retail payments, paper checks in particular, are based on information collected by survey in 1979 and were likely seriously out of date. we and the industry need more current information on which to base strategies going forward. we will also be reaching out to participants in the payments system in a variety of groupings to talk about alternative visions of the payments system of the future, what the legal, regulatory and technological barriers there might be to getting there and what we might be able to do to reduce those barriers. we certainly do not see the fed managing the process of transition to a more fully electronic payments system. we believe strongly that innovations must come primarily from the private sector and be tested in the marketplace to see if they meet customer needs at competitive prices. but there are times when progress can be stymied by legal or regulatory barriers or by the absence of technological standards, especially standards that allow communication among competing systems. in these instances, dialogue and collaborative effort can pay off for the whole system and its customers. the fed wants to be an active participant in that dialogue along with other providers and users of

last year. there are probably a number of reasons for this development. for one thing, the concept of the optimum conduct of monetary policy has evolved. the issue on the agenda today is the search for monetary policy rules, transparency and credibility. the sometimes too mechanistic views of the past on the fine - tuning effects monetary policy has on economic activity have thus taken a back seat. the transmission process has also turned out to be much more complex than originally thought and cannot be restricted to one or only a few parameters. nevertheless a central bank must not disregard the sensitivity of investment when trying to estimate its impact. in the light of sometimes heated debate surrounding the relevance of the user cost of capital in explaining investment behaviour, other links between monetary policy and investment decisions have gained increasing weight in the last few years. the importance of financial constraints and their main origins are now being debated extensively. the participants in this conference will surely have a few things to say on this issue. in this area the institutional pattern of relationships between enterprises and an economy ’ s sources of financing is of major importance. how significant is it if enterprises borrow funds more through banks or on the capital markets? how important is sufficient capitalisation for enterprises? what role does the balance - sheet structure of banks or competition among banks play in the willingness to grant loans? these and many more questions are vital and are by no means only of theoretical interest nowadays. it has frequently been predicted that the structure of financial systems and corporate finance will change in the wake of the technological progress in the financial markets and possibly also in connection with european monetary union. in the past, bank loans played a predominant role in corporate finance in germany and in most other countries in continental europe. this has changed somewhat of late and a further development towards increasing direct financing through the capital market is to be expected. there is wide speculation as to how this will affect investment. for instance, will more direct access to a broad capital market tend to ease the financial constraints - or, conversely, will the investment process become more disruption - prone owing to the diminished role of bilateral relationships between banks and enterprises? will some enterprises profit by such changes and others be at a disadvantage? and so on. naturally, the structure of the financial system is shaped by many factors, and the legal framework is only one of many aspects. before a decision is taken on the actual formulation of these legal provisions, the central banks will certainly be consulted. therefore, it is important for us at the central banks