banks : those of chile, israel, italy, and, i might add, the united states. one of my teachers at mit, stan fischer, is a sterling example of what mit training can produce. stan followed a brilliant career as a researcher and teacher at mit with important work as a public servant, including top positions at the world bank, the international monetary fund, and, currently, the bank of israel. why did economics at mit become so successful? perhaps paul samuelson and the people he helped to attract here could have been equally successful anywhere. but i suspect that the placement of economics in a milieu where quantitative reasoning and the scientific method are the coin of the realm was an important contributing factor. the sloan school, with its close links both to the economics department and to other parts of the institute, has benefited from the same milieu and has been the source of many fundamental advances as well. notably, in recent years the global financial industry has been transformed by new quantitative approaches to pricing complex financial instruments such as derivatives and to measuring and managing risk. this transformation stemmed from the application of formal tools of mathematical economics that were developed to a substantial extent by faculty at the sloan school, including fischer black, robert merton, and myron scholes - - the latter two of whom won nobel prizes for their work. as mit economics has benefited from its proximity to the scientific and engineering expertise of mit, so the institute has benefited from the presence of a world - class economics department, over and above the addition of still more luster to the mit name. the exposure of students and faculty from other divisions to the discipline and approaches of economics has stimulated creative thinking about how technology can be used to improve the economic welfare of the average person. that thought brings me to my second topic : the link between technology and economic growth. translating technological advances into economic growth as has always been the case, technological change and innovation are today in large part driving economic growth and the improvement of living standards. but it is important to understand that even the very best ideas in science or engineering do not automatically translate into broader economic prosperity. in large measure, the material benefits of innovation spring from complementarities between technology and economics, where i include in " economics " not only economic ideas but also economic policies and, indeed, the entire economic system. when the economics is right, scientific and technological advances promote economic development, which in turn, in a virtuous circle, may provide resources and incentives that help to foster

potential to be a new way to hold money and make payments. while all of this innovation opens up possibilities to do things differently than the past, it also carries risks. just like listening to music, the " how " may change, but the " what " will remain the same. as we look ahead, it's important to remember that even as the technology changes, the role of the central bank has not. it is and will always be to supply money and liquidity to bring stability to the economy and financial system. therefore, it's critical that we understand how these transformations could affect the economy and the financial system, as well as monetary policy implementation and central bank balance sheets. in addition, we must think carefully about proper regulation to protect consumers and investors and ensure the stability and safety of the financial system. 1 so, what are some of the things that the new york fed should be thinking about? to start, digital transformation could have implications for markets and for our interactions with counterparties, as well as how we carry out monetary policy. like in the example of music, change is already underway. take the fed's overnight reverse repo ( on rrp ) facility, for example2. the on rrp facility has broadened the set of our counterparties and diversified the type of instruments on the liability side of our balance sheet. this facility has supported the control of short - term interest rates according to the fomc's policy direction. this has had profound effects on the composition of liabilities on our balance sheet. traditionally, the fed's liabilities have primarily been paper currency and reserves held by banks at the fed. for example, a decade ago, paper currency totaled $ 1. 1 trillion and bank reserves $ 1. 5 trillion. but since then, we've seen a dramatic change in the makeup of the liability side of our balance sheet. today, in addition to $ 2. 3 trillion of currency and $ 3. 3 trillion of bank reserves, there are $ 2 trillion in overnight reverse repos, representing funding from nonbank sources such as money market funds. turning to the future, the big question is what a world of digital currencies like stablecoins and cbdcs would mean for the implementation of monetary policy. how will central banks anticipate and adapt to the changing landscape brought on by the possibility of digital currencies? there is much more to discuss about these important considerations in a fast - changing world