indicates there is only a small increase, on average, in consumer price inflation when the exchange rate depreciates is that it is unconditional in nature : it does not tell how the relationship may vary depending on which shocks hit the economy. one reason that structural models are useful is that they allow us to assess the relationship between exchange rate depreciation and consumer price inflation for a wide array of specific shocks, some of which may be regarded as potential risks to the outlook for inflation and real activity. structural models – especially modern dsge models – are also helpful from a heuristic standpoint insofar as they highlight the economic channels through which shocks affect the economy, which is important in assessing the transmission from exchange rates to inflation and real activity. the implications of a structural model for exchange rate pass - through clearly are sensitive to underlying features of the modeling environment. in formulating the sigma model, it was regarded as crucial that the model account for the empirical regularity of low pass - through of exchange rate changes to import prices. as i will illustrate, modeling assumptions that affect pass - through to import prices can have a major influence on the implied link between consumer price inflation and the exchange rate for any given shock. most open - economy dsge models in the literature – including the first generation of the federal reserve board's sigma model described in erceg, guerrieri, and gust ( 2006 ) – have embedded dixit - stiglitz preferences, implying that the desired markup of price over marginal cost is a constant. in such a framework, there is complete pass - through of exchange rate changes to import prices, at least after short - lived nominal price rigidities wear off. because import prices respond one - to - one to the exchange rate after a few quarters, shocks that cause the exchange rate to depreciate can put substantial upward pressure on consumer prices through the imported price component as well as through stimulating real activity by encouraging higher real net exports. it is instructive to contrast the implications of this " full pass - through " ( to import prices ) setting with the one that is embedded in the new version of sigma, which allows for variable desired markups. as noted previously, this feature tends to markedly damp pass - through from exchange rates to consumer prices in line with the empirical evidence i have discussed – both directly, because import prices respond by less to the exchange rate, and indirectly, because exchange rate changes tend to have smaller

. however, it is also clear that the globalisation of financial markets and increased merger activity exert pressure on those markets to adapt, to become more and more integrated, and similar. firstly, in terms of the kind of financial transactions which are considered “ state of the art ” and, secondly - this will take more time - also in terms of market structures. therefore, harmonisation as well as close cooperation between supervisors around the world are highly desirable. this is well understood and already common practice, as is demonstrated by the multilateral cooperation in international forums. iii let me now turn to the three specific areas, addressed in the question. in the area of accounting, the g7 assigned the international accounting standards committee ( iasc ) the task of establishing a worldwide harmonised set of core accounting principles. i strongly support this initiative and very much hope that we move towards a true world standard on this basis. ias ( international accounting standards ) should in my opinion be the requirement for a listing on all major stock exchanges of the globe. german legislation already allows banks to set up their consolidated accounts on the basis of the ias. the ias are currently reviewed by the basel committee, the iosco ( regulators for securities firms ) and the iais ( regulators for insurance firms ). some differences of opinion still exist, especially on the issue of “ fair value ” accounting. the iasc obviously prefers “ fair values ” ( which means market values ) for all financial instruments including the loan portfolio. the majority of regulators ( including germany ) favour such accounting only for instruments traded on financial markets. for traded instruments we can easily calculate “ fair values ” whereas this is much more difficult for assets and liabilities of the banking book. the european commission has taken up this issue with the aim of arriving at a common standard for ias and the european accounting legislation. iv with regard to the regulatory framework for e - money the us and europe take a different approach. in europe, the issuance of e - money will probably be regulated ( although the relevant eu directive has not yet passed the european legislative process ). most european countries perceive a need for such regulation in order to ensure sound market practices, to protect those who use e - money, and to take adequate account of both systemic and monetary policy concerns. the envisaged rules will allow for enough freedom for the e - money business to evolve, and technological progress will not be hindered. the united states is taking more of a “ wait and