. by tying ourselves to a reaction pattern, monetary policy credibility was restored and the way was paved for more stable economic developments. in the wake of kydland ’ s and prescott ’ s recommendations, both fiscal policy and monetary policy have become more rule - based in many countries. policy rules are useful in that they give weight to long - term objectives when faced with day - to - day economic policy challenges. since the early 1990s, many countries have implemented institutional reforms, such as central bank independence in the conduct of monetary policy to reach government - defined objectives. at the same time, the objectives of monetary policy have become clearer, with the primary objective normally being low and stable inflation. thus, the authorities in many countries have thereby committed to give priority to the long - term goals in monetary policy. the conduct of monetary policy under a flexible inflation targeting regime, given the defined objectives, also gives rise to challenges concerning commitment to a pattern of behaviour. however, the benefit of a commitment policy in relation to a discretionary policy is not as straightforward as for example that of a fixed exchange rate regime. the benefit of commitment to a pattern of behaviour lies in the fact that today ’ s prices, wages and exchange rates depend on expectations concerning future activity levels and interest rates. if, for example, a shock brings down inflation to a level that is considerably lower than the target in the short run, it is not only a low interest rate today, but even more so expectations of low interest rates in the future that will push up inflation. by committing to a response pattern that implies an expansionary monetary policy, not only in the immediate term but also somewhat further ahead, inflation may pick up faster again. but if economic agents ’ expect the central bank to discard this promise, inflation will not pick up to the same extent as would otherwise be the case. over time such a commitment policy will improve stability in both inflation and the activity level compared to a policy based on discretion. let me attempt to illustrate the gains of committing to a response pattern rather than pursuing a purely discretionary policy. we have developed tools that allows us to find interest rate paths that minimise the loss function, given a model of the economy ’ s functioning and given economic shocks. within the framework of a small macroeconomic model, we have estimated the magnitude of the shocks to which the norwegian economy has been exposed over the past 10 - 15 years. under the two assumptions about monetary policy, discretion and commitment, we have estimated how

luis maximo dos santos : the euro 20 years on - the debut, the present and the aspirations for the future closing address by mr luis maximo dos santos, vice - governor of the bank of portugal, at the conference “ the euro 20 years on - the debut, the present and the aspirations for the future ”, lisbon, 15 november 2019. * * * 1. twenty years ago we launched an unprecedented, historic experiment. eleven free and sovereign nations, including portugal, democratically decided – after checking compliance with the criteria set out in the maastricht treaty – to share monetary sovereignty, and exercise it jointly. it is true that history has witnessed several monetary integration processes ( and also some disintegration processes, by the way ). but none have been quite like the creation of the euro, given its nature and complexity. indeed, never before has such a vast and heterogeneous group of nations, in terms of both economic and social development and their history and institutions, decided willingly and in peacetime to live together under a monetary union. the step taken 20 years ago, pursuant to the provisions set out in the maastricht treaty, stemmed from the political ability to seize on the historical opportunity which then arose and was fully consistent with the need to complete the internal market and affirm europe ’ s position in the face of globalisation. but this was not at all an impulse driven by circumstance. on the contrary, it fulfilled a longsought ( but not always explicit ) goal of the european integration process and was the result of a long journey, full of breakthroughs and setbacks, which continued a gradual monetary integration process. the clearest example of this is the european monetary system, created in 1979. regardless of how we assess its rationale and results, it is appropriate to state that the creation of the euro was one of the boldest acts of economic and political proactivity ever performed and, for that very reason, has led us, to some extent, into uncharted territory. this gives us a precise idea of how fundamental it is to take the necessary measures to ensure that the european monetary unification is successful in the long term. 2. despite structural shortcomings in the economic and monetary union ( emu ) project, which were far more serious in its initial version ( and which have been discussed here today in part ), it is important to emphasise 20 years on that : i. the number of euro area member countries