continuation of previous best practice, while at the same time incorporating insights from economic theory and the experience of other central bank. i think it is fair to say that the strategy has served us well. the clearest evidence of this is the high credibility which the ecb has enjoyed since its inception. the historical fact that, at the time of the introduction of the euro, market interest rates on instruments denominated in euro all along the yield curve were to be aligned with the lowest – and not with the average – rates prevailing prior to the euro was not foreseen by many observers prior to stage iii. the historically low level of short, medium and long - term market interest rates was unthinkable in some countries, which had experienced much higher inflation in the past. in my view, the incorporation of monetary analysis into our monetary policy strategy served, in the eyes of the global market, as an anchor for expectations that in no small way contributed to our success in building and maintaining credibility. the monetary policy strategy of the ecb announced in october 1998 explicitly recognises the monetary nature of inflation by assigning an important role to money in the formulation of monetary policy decisions aimed at the maintenance of price stability. as prof. issing explained to us in detail, there were and still are many good reasons to do so. milton friedman ’ s famous dictum that “ inflation always and everywhere is a monetary phenomenon ” is one of the central tenets of economic theory. on the basis of the discussions at this conference, i draw the conclusion that there is no disagreement in the economics profession on this central tenet, but a lot of different views on how to organise the monetary analysis so that it has an appropriate influence on interest rate decisions. and this is the second issue mentioned at the opening of the conference. as was pointed out by prof. christiano and his co - authors rostagno and motto, including informational asymmetries, transactions costs and financial frictions in “ state - of - the - art ” macroeconomic models allows to better reflect the role of money and credit aggregates within such frameworks. i found compelling the argument that monetary analysis be used to monitor ( and possibly offset ) macroeconomic risks which are not related to price stability at shorter horizons, but which may nevertheless have important consequences for maintaining price stability over the medium and long run, like risks to financial stability. on this point in particular lucas papademos ’ remarks yesterday evening were particularly stimulating. although

we can all agree the markets stood up remarkably well. international meetings and joint forums such as iosco are a further step towards setting the foundation for more structured lines of communication amongst regulators. participation in iosco taskforces requires resources but helps to develop better appreciation of characteristics unique in other markets, and alternative approaches to addressing regulatory concerns. it is in recognition of this that mas has devoted resources to active participation in iosco ’ s committees and working groups. we have also found the memorandum of understanding ( “ mou ” ) to be a useful instrument for setting out mutually agreed procedures by which regulators may exchange information and provide mutual assistance. since the mid - 1990s, mas has entered into a number of such mous to ensure that the level of regulatory collaboration keeps pace with the capital market linkages that are in place. a formal arrangement enshrined in an mou may not be necessary in all cases, but are helpful amongst jurisdictions with substantive capital market linkages or trading arrangements in place. impetus for international standards the second proposition is the growing impetus for international standards. in this regard, iosco has taken the lead in putting forward a set of principles which its members subscribe to. some of the principles are necessarily pitched at a broad level, to allow members to agree on key areas which regulators should focus their attention. the challenge ahead is to continue working systematically on the principles to further cross - reference against quantifiable standards. there are several reasons why such international standards are important. danger of a weak link in the system the first is that interconnected markets means that transactions involving intermediaries or markets in different jurisdictions are always exposed to the weakest link. as an example, a localised weak link in clearing and custody networks used for cross - border transactions that buckles under stress will have far reaching repercussions on the smooth functioning of counterparties and markets in other jurisdictions. benchmarking the second reason is that, whereas regulations are developed for local usage, international standards are invariably developed under the close scrutiny of different regulators, and are derived after rigorous debate and sometimes protracted fine - tuning. the end product is usually of laudable standards and serves as a good yardstick for domestic practices to be benchmarked against. investor protection the third reason is that a common set of standards facilitates sound regulatory oversight that is based on consistent treatment of cross - border markets and activities. with regulators using the same standards in assessing systems, products and practices, market players that deal