by behavioural cognitive impairments. the approach of angeletos and lian ( 2016 ) is also promising. 3 their work is related to earlier contributions by morris and shin ( 1998, 2002 ) and woodford ( 2003 ) and is similar in spirit to adam and marcet ’ s work ( 2011 ) on “ internal ” vs “ external ” rationality. it relaxes the assumption of ‘ common knowledge, ’ which typically goes hand in hand with the assumption of rational expectations. the paper points out that the puzzlingly strong effects of forward guidance arise through general equilibrium mechanisms, such as the feedback loop between aggregate spending and inflation. assuming a lack of common knowledge attenuates the general equilibrium effects. sufficiently strong information frictions qualitatively solve the forward guidance puzzle through anchoring the response of expectations to changes in policy. this is clearly another intuitive and welcome development in the theory of monetary macroeconomics. what do these findings imply for the practice of forward guidance? as policy makers, we know that many of the conditions that the standard models presuppose are often not met in practice. we are also acutely aware of the challenges that arise when attempting to effectively communicate the conditionality of promises on the future path of interest rates. we understand the advantages of a consistent and clear communication strategy – indeed, inconsistent or vague promises about the future course of monetary policy often introduce additional noise and 3 / 9 bis central bankers'speeches raise rather than reduce economic uncertainty. my answer therefore is that we will continue using forward guidance to some extent, but knowing that it is an imperfect tool and therefore only as one of the various non - standard measures that we can activate when deemed necessary. large scale asset purchases large - scale asset purchases, especially purchases of sovereign bonds since early 2015, have been one of our most salient non - standard measures in the euro area. the eurosystem has already purchased more than 2 trillion euros of public and private assets and we intend to purchase assets at a monthly pace of 60 billion euros until december 2017, or beyond, if necessary, and in any case until the governing council sees a sustained adjustment in the path of inflation consistent with our inflation aim. the programme was instrumental in eliminating deflation risks, contributes to the ongoing recovery and helps us bring inflation closer towards our objective. the app in the euro area has drawn attention to particular transmission channels of large - scale asset purchases over and above the standard portfolio rebalancing and signalling channels. another

objective and its communication, but most importantly in its determination and consistency in pursuing price stability ( the nominal anchor ). so far, i have fully agreed with the role and significance of seven, out of the nine, principles proposed by frederic for providing the scientific underpinning of monetary policy. there are two principles, however, that i do not consider as having been fully and widely accepted and reflected in the practice of monetary policy : the principle concerning the role and usefulness of monetary policy rules and the one pertaining to the role of financial frictions in business cycles. these two principles do not belong, at least not yet, to the core propositions underlying the science of central banking not because their content is not important but for other reasons. in the case of the policy rules, the simple reason is that they are not used – by most central banks – in the actual conduct of monetary policy, although they may be used for analytical purposes and as benchmarks for comparison of the policies implemented in practice. there are several reasons why such rules are not used in the practice of monetary policy. one such reason, which i will highlight later on, is related to the imperfect inflation available for estimating reliably key variables included in these rules, in real time. in the case of the role of financial frictions – which i consider to be especially important – i am somewhat sceptical of its inclusion in the core principles at this stage because we have not yet reached the state of knowledge to incorporate financial frictions fully in the monetary policy framework in a generally acceptable manner. this principle is likely to be included in the core principles in the future, but only after further analysis and empirical support for its validity and robustness. there is, however, a notable omission in the list of the key principles to guide the thinking at central banks and the conduct of monetary policy : the role of money, or more precisely monetary and credit aggregates, in the monetary policy transmission mechanism and in the assessment of the medium and long - term risks to price stability as well as to financial stability. this principle provides one of the foundations in the ecb ’ s analytical framework. i recognise that in recent years its role and significance has been deemphasised by some economists and at some central banks, but as i have argued before, the fundamental role of money in the conduct of monetary policy should not be ignored, but rather emphasised and further explored. and this should be part of the research agenda that will