market bubble. with hindsight, economists have viewed this monetary policy tightening as a mistake. given the uncertainty about the effect of interest rates on bubbles, raising rates to deflate a bubble may do more harm than good. furthermore, altering the trajectory of interest rates from the path predicted to have the most desirable outcomes for inflation and employment over the foreseeable horizon has the obvious cost of producing deviations from these desirable outcomes. because i doubt that any of the three assumptions needed to justify a special monetary policy focus on asset prices holds up, i am in the camp of those who argue that monetary policy makers should restrict their efforts to achieving their dual mandate of stabilizing inflation and employment and should not alter policy to have preemptive effects on asset prices. however, there is a further reason why i believe that a central bank should not put too much focus on asset prices. such a focus can weaken its public support, making it harder for it to successfully conduct monetary policy to stabilize inflation and employment. a central bank that focuses intently on asset prices looks as if it is trying to control too many elements of the economy. part of the recent successes of central banks throughout the world has been that they have narrowed their focus and have more actively communicated what they can and cannot do. specifically, central banks have argued that they are less capable of controlling real economic trends in the long run and should therefore focus more on price stability and damping short - term economic fluctuations. by narrowing their focus, central banks in recent years have been able to increase public support for their independence. a central bank that expanded its focus to asset prices could potentially weaken its public support and may even cause the public to worry that it is too powerful and has undue influence over all aspects of the economy. too much focus on asset prices might also weaken support for a central bank by leading to public confusion about its objectives. when my co - author and i conducted our evaluation of monetary policy in sweden, i directly observed this problem. i heard over and over again in interviews with participants from different sectors of swedish society that the statements about house prices by the riksbank confused the public about what it was trying to achieve. my discussion so far indicates that central banks should not put a special emphasis on prices of houses or other assets in the conduct of monetary policy. this does not mean that central banks should stand by idly when such prices climb steeply. rather my analysis suggests that central banks can take steps to make it less likely

is full of many successful examples, probably the most so far in the world history, of application of wide range of prudential measures, modifications in the standard set of instruments and implementation of nonstandard measures of monetary policy. the need of comprehensive risks monitoring in the economy and greater flexibility concerning the intensity and the type of measures, taking into account the ultimate monetary objectives, is probably one of the major lessons from the crisis. the economic theory clearly refers to the fact that the financial system is a relevant factor for economic growth, and the new message, clearly sent by the recent crisis, as the president of the bundesbank, weidmann, once said in one of his recent addresses, 1 is that there is a need of “ well designed regulatory reform ”. otherwise, a financial system which is developed and widely globalized today could become an obstacle for the economic growth. thus, even though the crisis is still present in our everyday life, the financial institutions have already been facing new banking standards, and the national regulators seek to incorporate them in the national regulation. the debt crisis in the euro area resulted in establishment of new fiscal framework of the european union and emphasized the need of fiscal consolidation. fiscal imbalances are not sustainable on a long run, which is a postulate that also applies to the countries of the region, particularly countries where fiscal consolidation is crucial for maintaining macroeconomic equilibrium. besides the experiences above, during the crisis we also gained many other experiences related to the market sensitivity, the promptness of market response to the changes arising from the development of crisis, and the slow reversible process of regain of confidence among market participants. lessons and experiences learnt from the crisis should help us face future challenges more successfully. jens weidmann, president of the deutsche bundesbank, keynote speech at the frankfurt finance summit, frankfurt, march 2012. bis central bankers ’ speeches conclusion please allow me to ascertain that this crisis broadened our perspectives, imposed new aspects of policy making, and increased our interdependence in the global economy. the south - eastern european countries which have been facing many challenges on their pathway to the european union will probably face new future challenges arising from the current conceptual shifts in the union. however, the countries from south - eastern europe should continue seeking to create sound macroeconomic policies, inevitably accompanied by structural reforms that need to ensure higher structural quality and structural flexibility of economies, which is a sine qua non not only for prompter