to assess the probable impact of a changed financial system on investment behaviour in the corporate sector and on the effectiveness of monetary policy. in this connection it is also vital for such a legal framework to be reliable. the general relevance of uncertainty for investment behaviour has recently attracted quite some attention, and it will be interesting to observe how events will unfold in this field. a “ one - size - fits - all ” assessment of the determinants of investment behaviour would certainly oversimplify the issue. construction investment is only comparable with investment in machinery and equipment to a limited extent, while stockbuilding is a different matter altogether. investment in research and development is becoming a particularly important element in ensuring a future - proof economy. in addition, there is good reason to assume that this type of investment is governed by a different set of rules, either because of the higher risks involved or because it pays off only after a relatively long time or because investors in this field have few realisable assets to offer to their lenders as collateral. against this background, an analysis of investment in research and development would appear to be particularly important. i am glad that this conference will devote particular attention to that aspect. today ’ s world is characterised above all by globalisation. national borders are much less of a barrier for the markets than they used to be. this is a result of technological progress, which enables us to overcome time and space much more quickly, and of the triumph of the market economy. nobody can afford to reject it unless he is willing to make massive sacrifices in terms of welfare. in europe we have actively promoted this already existing trend by creating the single market and by establishing european monetary union. the innovations associated with investment have made a crucial contribution to an increased convergence of the markets. conversely, worldwide integration is exerting a strong influence on the determinants of investment. competition has become tougher ; today investment decisions no longer depend solely on local conditions but on international conditions. from the early nineties to 1998 cross - border investment all over the world tripled. this development has been viewed with concern by some. domestic investment by non - residents has sometimes been debated in terms of “ selling out the country ” and has at times raised fears that such investment is solely intended to eliminate troublesome competitors. in turn, investment abroad has raised fears of domestic jobs being lost. even though these concerns cannot be brushed aside lightly, and hardships may occur in individual cases, it is important to keep driving home

last year. there are probably a number of reasons for this development. for one thing, the concept of the optimum conduct of monetary policy has evolved. the issue on the agenda today is the search for monetary policy rules, transparency and credibility. the sometimes too mechanistic views of the past on the fine - tuning effects monetary policy has on economic activity have thus taken a back seat. the transmission process has also turned out to be much more complex than originally thought and cannot be restricted to one or only a few parameters. nevertheless a central bank must not disregard the sensitivity of investment when trying to estimate its impact. in the light of sometimes heated debate surrounding the relevance of the user cost of capital in explaining investment behaviour, other links between monetary policy and investment decisions have gained increasing weight in the last few years. the importance of financial constraints and their main origins are now being debated extensively. the participants in this conference will surely have a few things to say on this issue. in this area the institutional pattern of relationships between enterprises and an economy ’ s sources of financing is of major importance. how significant is it if enterprises borrow funds more through banks or on the capital markets? how important is sufficient capitalisation for enterprises? what role does the balance - sheet structure of banks or competition among banks play in the willingness to grant loans? these and many more questions are vital and are by no means only of theoretical interest nowadays. it has frequently been predicted that the structure of financial systems and corporate finance will change in the wake of the technological progress in the financial markets and possibly also in connection with european monetary union. in the past, bank loans played a predominant role in corporate finance in germany and in most other countries in continental europe. this has changed somewhat of late and a further development towards increasing direct financing through the capital market is to be expected. there is wide speculation as to how this will affect investment. for instance, will more direct access to a broad capital market tend to ease the financial constraints - or, conversely, will the investment process become more disruption - prone owing to the diminished role of bilateral relationships between banks and enterprises? will some enterprises profit by such changes and others be at a disadvantage? and so on. naturally, the structure of the financial system is shaped by many factors, and the legal framework is only one of many aspects. before a decision is taken on the actual formulation of these legal provisions, the central banks will certainly be consulted. therefore, it is important for us at the central banks