##o and gordon or rogoff popularised the idea. being here as the president of the bundesbank, let me just mention as an aside that there were few central banks that followed a stability - oriented monetary policy framework early on and which did not fall into the trap of a crude phillips curve thinking in times when this concept was still in fashion in other policy circles. but given that, in the long - run, we are all stability - oriented monetary policymakers, it is nonetheless legitimate to ask what the phillips curve concept has to tell us today. the wide and impressive spectrum of issues covered at this conference makes clear that no one single speech can hope to find answers to this question. in my following remarks, i would just like to highlight a number of aspects that i feel to be of importance in my capacity now as a practitioner of monetary policy in the eurosystem. the phillips curve in monetary policy research 2. 1 monetary policy design and challenges in a low - inflation environment as a starting point, let me go into slightly more detail concerning the lessons learnt over the past few decades. it is indeed the case that various institutional changes in monetary policymaking can be traced back to research on the phillips curve. and i would like to argue that, in a period of low and stable inflation, these achievements are not merely of historical interest. on the contrary : in my view, what is key is the insight that most of the credit for the beneficial inflation climate worldwide is due to monetary policy having – sometimes painfully – learnt the lessons of the past, especially those related to the phillips curve. and, as success breeds complacency, it is vital that these lessons are not forgotten. this is more than the usual claim of a cautious central banker as, in my view, there is also some risk that the current environment of low and stable inflation rates might lead us to some mistaken beliefs about policy implications. and such wrong - headed policy advice might be inferred from a too naive belief in that policy could exploit the relationship expressed in ( reduced form ) phillips curves. the contributions of lucas and kydland and prescott initiated fruitful research on the optimal design of central banks. to name just a few of the subsequent fundamental advances : the key role of inflation expectations and therefore the key role of credibility in monetary policy. for these the central issues are the overriding importance of central bank independence, the investment in a “ good reputation ” by combating inflation, as well as the potential

##etarist and new classical camps for several years. furthermore, the initially stable empirical support of the trade - off had broken down during the stagflation crisis in the 1970s. accordingly, there were times when the famous dictum of robert solow that “ any time seems to be the right time for reflections on the phillips curve ” was not acknowledged by our profession. however, in recent years, research on the phillips curve has experienced a renaissance. about a year ago, the economist wrote that “ if haircuts and dress styles can come back into fashion, then so can the phillips curve. ” and this weekend ’ s conference clearly proves that the idea of a. w. phillips is again of major relevance for macroeconomists and monetary policymakers alike. however, developments over the past 30 years have dramatically transformed the economic thinking underlying the phillips curve. thanks to the lucas critique and the earlier contributions of ned phelps and milton friedman, we know today that the empirical relationship expressed in the phillips curve is not structural, but ( inter alia ) influenced by expectations and differences in underlying policy regimes. 1 to do some justice to history it should be mentioned that even solow and samuelson in their 1960 paper, which is widely regarded as promoting a crude phillips curve philosophy, presented their arguments in a more subtle way. both wrote “ we must give another caution. all of our discussion has been phrased in short - run terms ….. it would be wrong, though, to think that our figure 2 menu [ i. e. the phillips curve ] … will maintain its shape in the longer run. it might be that the low pressure demand would so act upon wage and other expectations as to shift the curve down in the longer run. thus, the current theoretical consensus model is markedly different to the original one. based on solid microfoundations and rational expectations, the new keynesian phillips curve ( nkpc ) has taken up the fierce criticism of new classical economists. emphasising, however, stickiness of prices or information still delivers keynesian features and allows for real effects of monetary policy in the shortrun. at the same time, extended versions of the phillips curve have been the starting point for policy analysis : the insights of the literature on time - inconsistency, based on an expectations - augmented phillips curve, have been well taken by monetary policy makers. thus, the famous inflation bias poses much less of a problem today than it did back in the 1980s when barr