parameters are not necessarily stable. in particular, consider the intercept term. the usual specification of the rule assumes that this intercept term is a constant 2 percent equilibrium level of the real interest rate. however, it is well known that equilibrium real rates of interest are not constant, and modern macroeconomic models of optimal monetary policy all take this into account. assuming that the equilibrium real interest rate is constant is just as egregious an error as failing to account for the time - varying nature of the natural rate of unemployment. we all know that mis - specifying the natural rate of unemployment can lead to seriously inappropriate monetary policy outcomes like double - digit inflation in the 1970s. it certainly seems that the fallout from the financial crisis and persistent headwinds holding back economic activity are consistent with the equilibrium real interest rate being lower than usual today. indeed, if you put any weight whatsoever on the secular stagnation hypothesis that larry summers and paul krugman have described, 11 an appropriate analysis would recognize lower expected real rates of interest. in any event, the fomc ’ s latest policy statement in march recognizes this possibility of lower real rates, as the committee stated it currently anticipates that “ even after employment and inflation are near mandate - consistent levels, economic conditions may, for some time, warrant keeping the target fed funds rate below levels the committee views as normal in the longer run. ” 12 taylor ( 1993 ), p. 197. taylor ( 1979 ). see summers ( 2013 ) and krugman ( 2013 ). federal open market committee ( 2014a ). bis central bankers ’ speeches conclusion during ben bernanke ’ s eight years as fed chair, the fomc worked hard to make the fed ’ s policy intentions clear ; and i am confident that the fomc under chair yellen will continue along this same path. when the federal funds rate got stuck at zero and goal - oriented monetary policy said to do more, we did more! we implemented the following : the first quantitative easing program, or qe1, in march 2009 ; 13 qe2 in fall 2010 ; the initial forward guidance on the federal funds rate in august 2011 ; operation twist in fall 2011 ; the openended qe3 in fall 2012 ; and the enhanced threshold forward guidance in december 2012. all of these were ways to go beyond the policy inaction that was the prescription of simple constrained policy rules, and do something to meet our policy mandates. in conclusion, let me

could be the leader to unite us. we need to be united in any case. so given all those risks that you just mentioned, how resilient, or how vulnerable, is the eurozone? well, if you take a look back, it ’ s -, i think it ’ s fair to say that we are much more resilient, the eurozone is much more resilient than it was only a couple of years ago. the structures have been made stronger, reforms have started in countries, growth is now much higher, it is solid, it is firming up. we are much more solid. that said, we would like to be sure that the eurozone can withstand the kind of global shocks that we ’ ve seen in 2007, 2008, 2010. and for that we need to be even stronger, so we ’ ll need more solid institutions in the eurozone, we ’ ll need that sense of commonality that i was mentioning earlier, but for that to happen, you need countries to be closer. so you need countries to converge. you need each and every country to be stronger. so right now, we ’ re still vulnerable. we are not vulnerable, we are in a process of strengthening our structures, and the first step is for countries to reform, to provide their contribution, and then at some point there will be another discussion on how to pull things together, and how to make the eurozone stronger as a group. but really, the priority is for countries to reform, to bring their unemployment rate lower, to create productivity, to be business friendlier in each and every country. 4 / 4 bis central bankers'speeches