erkki liikanen : at the interface of research and monetary policy remarks by mr erkki liikanen, governor of the bank of finland, at the meeting of the finnish economic association, helsinki, 17 may 2016. * * * my purpose today is to discuss the use of economics for policy advice in light of four examples. thinking about the relationship between theory and practice, there are some unavoidable differences, or even tensions, between how economic scientists on the one hand, and decision makers on the other see the policy process. both perspectives are necessary and in fact complement each other. cameron cobbold, who was the governor of the bank of england in the 1950 ’ s, has been quoted as saying, “ the central bank is a bank, not a study group ” ( capie 2010, p. 99 ). it is important for central bankers to remember that they are employed to deliver results, and should not be victims of the so - called “ paralysis by analysis ”. at the same time, it is dangerous if policy makers do not realize how dependent they actually are on economic thinking. as keynes wrote, “ practical men who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist. ” ( keynes 1936, p. 383 ) it is much better if policy makers are aware of where they stand in relation to current economic thought. how can this awareness be created and maintained in a changing world? there is a certain basic, perhaps mechanical view of the use of economics in policy making that goes back to jan tinbergen. this view considers mainly the kind of economic analysis that is done inside policy organizations such as ministries, central banks and the like. this kind of policy advice consists of forecasts and quantitative policy analyses. these help, for example, monetary policy decision makers to set their given policy instruments to achieve the desired results. ( tinbergen 1955 ). the role of this kind of policy planning processes inside central banks and finance ministries is important, but it is by no means the only type of interaction between professional economists and policy makers. in addition to these processes, i would like to highlight the informal interaction between economists and policy makers which, in the longer scheme of things, might be even more important than the internal policy processes within institutions. what i am talking about here is the dialog that takes place between professional economists and policy makers, in which political doctrines and ways of thinking develop parallel to the latest currents in

. developing our division of labour is especially important, as the eurosystem needs to improve its cost efficiency to a significant degree. many activities have large fixed costs and thus delegating them to some central banks avoids duplication of these costs. this kind of pooling is actually one of the most promising ways of pursuing the efficiency goals set out in the organisational principles. for these reasons, the bank of finland takes a very positive attitude to this drive for efficiency through deeper cooperation. however, some conditions for further progress in the field should still be borne in mind. in particular, governance and accounting systems must be built very carefully for each " pooling " arrangement, ensuring that costs and benefits are adequately measured and shared, and that users can get sufficient control of how the pooled services are produced and developed. this is, of course, necessary for the kind of trust required for the delegation of tasks. it is also in conformity with our organisational principles which emphasize the values of transparency and accountability. secondly, we expect that all eurosystem central banks can and will participate in the emerging division of labour on the basis of reasonable reciprocity. this reciprocity also conforms nicely with the organizational principles, according to which " all members of the eurosystem shall contribute strategically and operationally to the goals of the system ". the bank of finland for its part – as with other ncb's – actively analyses its relative strengths and considers its capacity to participate in the emerging division of labour in a balanced way ; not only as a user of pooled services, but also as a service provider. so i expect that our willingness to participate in future pooling schemes will be in some proportion to our prospects of hosting some of the services, where we feel we can usefully contribute. however, i expect that the conditions which i have mentioned here will not prove any great obstacles for progress in the important further deepening of operational cooperation within the eurosystem. good governance models for pooling schemes will be developed – perhaps along the lines marked by the cashssp project – and ncb's will find their niches, in which they can make their strongest contribution to the success and efficiency of the system as a whole. to finish, let me again congratulate all those who have worked in order to make this cooperation agreement possible and also express my appreciation of the national bank of belgium for its very useful and innovative work. thank you.