which include inter alia competing forecasts from other private and public organisations as well as other pieces of information that, for a number of reasons, are difficult to integrate within the framework of the projections. by way of example, information ( i. e. data, indicators, analyses, etc. ) that becomes available after the cut - off date for the projections cannot, by definition, be incorporated in the exercise. at a more fundamental level, we should acknowledge that even the state - of - the - art macroeconometric models of the kind used nowadays by leading central banks are, as yet, unable to fully incorporate a richer description of the economy ’ s financial structure. wealth effects, swings in asset prices, credit and liquidity constraints and other financial frictions are not sufficiently taken into account. that results in an over - simplified view about the channels through which monetary policy can affect economic activity and inflation. it also affects the ability of such models to identify, and hence estimate with any degree of precision, the potentially significant role of financial variables and financial intermediation in the monetary transmission process. academic research is progressing on this front and, hopefully, at some point in time, workable and operational models will be developed that allow for more realistic settings where the complex interactions between the real and financial sectors of the economy are acknowledged in full and where financial variables ( notably money and credit ) play an active role in the monetary transmission mechanism. when this has been achieved, it will be possible to turn the two pillars of our analysis into a larger, single pillar as vice president lucas papademos 7 has put it. or, if you prefer another metaphor, we could join the two pillars with an arch, thus forming a solid bridge to support our monetary policy decisions. but policy is an ongoing activity. policy - makers cannot afford the luxury of waiting for research advances to happen. empirical evidence supporting these advances is itself frequently uncertain and provisional, open to revisions. constantly confronted with the burdens of judgment, we are very much like sailors in neurath ’ s boat. and, in this respect, i believe that the eurosystem ’ s monetary policy strategy has been particularly useful in helping us navigate through the deep waters of pervasive uncertainty and to make decisions in real time. in my view, the eurosystem ’ s concept has clear strengths. it permits a diversified approach to the assessment of economic developments and the outlook for price stability. it encourages cross - checking between different forms

of inflation targeting were joined later on by a number of developing countries ( for example brazil, south africa and thailand ) as well as by some east european transitional economies ( such as poland, the czech republic and hungary ). with hindsight, the policies pursued within this framework have been a success, particularly in those countries which – starting from a relatively high inflation level – needed to bring inflation expectations back into line with the central bank ’ s objective. but also other countries ( like norway ) with no particular difficulties in terms of anchoring inflation expectations have moved in this direction, presumably because their central banks were convinced of the benefits per se of the strategy. at present some twenty central banks have adopted an inflation targeting framework 4, and some observers would add a few more to that number. the monetary policy strategy of the eurosystem the eurosystem has not followed the same route. in october 1998, the governing council of the ecb dismissed the adoption of either inflation or monetary targeting and decided instead to select a strategy of its own, which aims at maintaining price stability over the mediumterm. the idea was to develop a credible and flexible, tailor - made strategy that would allow for timely responses to a changing environment, while keeping in clear focus the objective of price stability. and it was necessary to take account of two key factors of that time : the regime shift implied by economic and monetary union ( emu ) and the heightened uncertainty that surrounded the introduction of the single currency. whilst it was important to build on see kydland f. e. and prescott e. c. ( 1977 ), " rules rather than discretion : the inconsistency of optimal plans ", journal of political economy, 85, 473 - 92 and barro r. j. and gordon r. ( 1983 ), " a positive theory of monetary policy in a natural rate model ", journal of political economy, 91, 589 - 610. see rogoff k. ( 1985 ), " the optimal degree of commitment to a monetary target ", quarterly journal of economics, 100, 1169 - 1190. cukierman a. ( 2007 ), “ central bank independence and monetary policymaking institutions - past present and future ”, cepr discussion paper 6441, september. see c. berg ( 2005 ) : “ experience of inflation - targeting in 20 countries ”. economic review, 1. sveriges riksbank. state - of - the - art economic research and on