methods lead to diverging results depending on the individual “ price collector ”. therefore, centralisation of quality adjustment is the path often proposed. however, this is out of reach at the european level for the time being. another way is to eliminate unreliable methods for quality adjustments so that the applied methods by individual “ price collectors ” will on balance result in unbiased estimates of the true price change. this is how germany has been trying to solve the problem, and this has also been eurostat ’ s method so far. in my view, the pragmatic approach should be carried out very carefully with all relevant parties cooperating in a network of experts. what i mean here – among other things – is accompanying research on a permanent basis. official methods have to be checked against potential alternatives. hedonic price indices should be thoroughly developed and assessed. at the end of the conference, we may be better able to answer the question as to how far hedonics can be used to generate indices in a timely manner. at any rate, there is much to be done regarding quality adjustment in price statistics. but before you go back to addressing the quality of price statistics tomorrow, it is now a pleasure for me to invite you to test the quality of our buffet. unlike in the use of hedonics, here “ there is a free lunch ”.

independent central bank in a modern economy. this role is the key issue i want to address today. and since i am a european central banker, i will discuss it from that particular perspective. 2 what monetary policy can do and what it cannot do 2. 1 lessons from history ladies and gentlemen, 1 / 8 bis central bankers'speeches in the 16th century, when conquerors robbed the gold and silver treasures of the americas and brought them to europe, they also paved the way for inflation. early economists ( such as jean bodin and david hume ) learned that the supply of money has an impact on the price level. as long as an economy operates below capacity limits, a larger money supply can result in a higher output of goods and services. but once full employment is reached, more money will ultimately lead to higher prices. with the adoption of fiat currency, it was possible simply to print legal tender. this posed a permanent temptation to governments, as they could use the printing press to finance their spending. giving in to this temptation led to some of the most terrible episodes of hyperinflation, such as in venezuela today, in zimbabwe a decade ago, but also in germany in the distant past. in my country, the enormous government spending during the great war and in the following years eventually brought about hyperinflation. inflation peaked in 1923, when prices doubled in less than 4 days. 2 such astronomically high price increases deeply interfered with people ’ s everyday lives. this was expressed in john maynard keynes ’ quip that people got used to ordering two beers at a time, because the price would rise faster than the beer became warm. 3 extreme cases illustrate one aspect of the costs of inflation. indeed, many people lost their financial wealth in these times. on the other hand, the burden of debtors – the government, in particular – was easily wiped out. it is the weakest groups of society who typically suffer most from inflation. wage earners and transfer recipients like pensioners have only limited possibilities to hedge against it. governor kganyago explained it in a recent speech when he said : “ where monetary policy tolerates higher inflation, this tends to reduce spending power, especially for the poor. ” 4 distributional shifts and the overall economic damage of elevated inflation often create social unrest and political instability. however, history has taught us that deflation, a general, sustained and self - reinforcing decline in the price level, can also be devastating for the economy, as