balance sheet, often needs to be especially detailed. sitting at the juncture of the real and financial economies, central banks should be especially well placed to undertake that analysis. to be clear, those are my individual views. our governance structure provides constructive incentives for each of us to reveal our views on issues of this kind – to each other, and in public. conclusion much of the world economy has been enjoying a period of sustained macroeconomic stability. reforms under a series of governments to enhance the flexibility of product and labour markets have helped our economies to absorb shocks. but few people doubt that stability requires credible monetary institutions. the practice and theory of monetary policy has travelled a long way over the past 15 years or so. as performance has improved, so more refined questions have emerged about the optimal conduct and communication of policy. many of those issues will feature in this conference. my purpose this morning has been to cast those questions in the context of the political economy conditions in which individual central banks are constituted and operate, using the uk ’ s mpc as an example. central bank independence is a solution to a political economy problem – time inconsistency. precisely how that problem is resolved may legitimately vary from country to country. in the uk, it was achieved only after democratically elected politicians had done some of the politically contentious heavy lifting in bringing inflation down, and after a period in which the case for price stability had been made. the monetary regime introduced in 1997 was necessary to embed credibility. its detailed design properly reflected uk circumstances. circumstances elsewhere differ, and so details in central banking practices vary. but not every central bank practice everywhere may be optimal, and what is feasible for each country ’ s monetary system alters over time. we therefore need to learn from each other, without imagining that all design features travel safely : learning without proselytising. academic research plays a huge role in keeping us intellectually honest, and so in progressing those debates. see tucker, p. m. w., “ reflections on operating inflation targeting ”, speech at the graduate school of business, university of chicago, july 2006.

. this ran through the speeches of robin leigh - pemberton, eddie george and mervyn king in the late 1980s and early 1990s, as well as in bank research. analytically, energised by the current governor when chief economist, the bank put resources into analysing the costs of inflation, and into contributing to the so - called time - consistency literature on the central importance of mechanisms to underpin trust in a monetary authority ’ s declared commitments. 11 and in more public spheres, eddie george ’ s speeches in the early 1990s repeatedly stressed the emergence of a consensus, domestically and internationally, about macroeconomic policy goals and means. price stability was not see letter to the times from 364 academic economists, april 1981. notably samuel brittan and peter jay. see, for example, sir samuel brittan ’ s 1981 paper “ how to end the “ monetarist ” controversy : a journalists reflections on output, jobs, prices and money ”, london : iea. see lawson, n., 1984, “ the british experiment ”, the fifth mais lecture at city university business school, june. these differences of emphasis emerged during the review of macroeconomic policy objectives and instruments discussed in chapter 36 of lord lawson ’ s book “ a view from number eleven ”. see nigel lawson ’ s 1984 mais lecture, op. cit.. in 1992, governor leigh - pemberton gave a lecture entitled : “ the case for price stability ”. as well as reviewing the costs of inflation, the lecture reprised the early - 1980s debate on the rate of inflation the authorities should settle for ( see note 9 ), in a section entitled “ why not settle for 5 %? ”. these issues were also the centrepiece of the bank ’ s tercentenary conference in 1994 on the future of central banking. see fischer, s, “ modern central banking ”, in capie f., c. goodhart, s. fischer and n. schnadt ( eds. ), 1994, the future of central banking : the tercentenary symposium of the bank of england, cambridge university press. see also briault, c., 1995, “ the costs of inflation ”, bank of england quarterly bulletin, february. and haldane, a. ( ed. ), 1995, targeting inflation : a conference of central banks on the use of inflation targets organised by the bank of england, march. just an end in itself but a precon