s conference based on events very much on the minds of central bankers : " global supply shocks, trade frictions, and inflation. " global and sectoral supply shocks over the past few years have had significant effects on trade, economic activity, and inflation, and they figured prominently in monetary policymaking. the effects of these shocks have varied across different economies, but a common theme is elevated inflation. the current economic environment has raised several policy questions that the papers presented here attempt to answer. these are questions that policymakers, including those of here today, must grapple with, even when the answers are far from apparent. academic research provides insights into these questions and possible answers, ways to analyze the data, and the foundations for testing theories with economic models. 1 / 2 bis - central bankers'speeches the papers presented here today and tomorrow are ideal examples of the kind of work that can help policymakers do their jobs better, and can facilitate sharing knowledge around the world. we have sessions on inflation, of course, and supply chain disruptions, and optimal monetary policy, and the important topic of uncertainty, which central bankers to some extent always face. before we get to those presentations, and what i hope will be vigorous discussions, let me recognize several people who made this event possible. assisting governor makhlouf at the cbi in organizing this conference has been daragh clancy. daragh and robert kelly at the cbi worked with a subset of ijcb editors to review the papers, but let me mention all of those editors, including klaus adam, tobias adrian, huberto ennis, refet gurkaynak, oscar jorda, keith kuester, elena loutskina, robin lumsdaine, fernanda nechio, and steven ongena. this conference and the day - to - day smooth running of the journal couldn't be accomplished without the editorial team at the bis and the board of governors as well as kommaly dias and grace chuan from my staff. and, finally, a big thank you to my adviser jane ihrig, who does so much for me and who worked very, very hard to oversee the process at ijcb for this past year. and with that, i will step away from the microphone and put the spotlight where it should be, on the scholars presenting their work today. thank you, and i believe daragh has a few words to get us started. 2 / 2 bis - central bankers

excess in the demand for funds. as a consequence, market interest rates are already moving in the direction of containing the excess of demand in financial markets and therefore in product markets as well. for example, bbb corporate bond rates adjusted for inflation expectations have risen by more than 1 percentage point during the past two years. however, to date, rising business earnings expectations and declining compensation for risk have more than offset the effects of this increase, propelling equity prices and the wealth effect higher. should this process continue, however, with the assistance of a monetary policy vigilant against emerging macroeconomic imbalances, real long - term rates will at some point be high enough to finally balance demand with supply at the economy ’ s potential in both the financial and product markets. other things equal, this condition will involve equity discount factors high enough to bring the rise in asset values into line with that of household incomes, thereby stemming the impetus to consumption relative to income that has come from rising wealth. this does not necessarily imply a decline in asset values - although that, of course, can happen at any time for any number of reasons but rather that these values will increase no faster than household incomes. because there are limits to the amount of goods and services that can be supplied from increasing net imports and by drawing on a limited pool of persons willing to work, it necessarily follows that consumption cannot keep rising faster than income. moreover, outsized increases in wealth cannot persist indefinitely either. for so long as the levels of consumption and investment are sensitive to asset values, equity values increasing at a pace faster than income, other things equal, will induce a rise in overall demand in excess of potential supply. but that situation cannot persist without limit because the supply safety valves are themselves limited. with foreign economies strengthening and labor markets already tight, how the current wealth effect is finally contained will determine whether the extraordinary expansion that it has helped foster can slow to a sustainable pace, without destabilizing the economy in the process. technological change continues apace on a broader front, there are few signs to date of slowing in the pace of innovation and the spread of our newer technologies that, as i have indicated in previous testimonies, have been at the root of our extraordinary productivity improvement. indeed, some analysts conjecture that we still may be in the earlier stages of the rapid adoption of new technologies and not yet in sight of the stage when this wave of innovation will crest. with so few examples in our history, there is