, slavery and causality. and he engaged, alla pari, with giants of his field such as robert fogel and douglass north. indeed, he used his extreme fluency in economic theory, and especially with the neoclassical tools of the field, to provide substantial new insights, correct misinterpretations and suggest new perspectives. i still recollect how interesting, and unconventional to say the least, i found his paper on real value added and the measurement of industrial production published in 1976 in the nber annals of economic and social measurement. it triggered a debate with christopher sims who, arguably, did not quite grasp stefano ’ s main point : that in the context stefano was interested in, an appropriate measure of real value added should reflect changes in relative prices, and not just the physical flows of goods and services. stefano returned to this issue over time, most recently in the fascinating second chapter of his last book reconstructing the past ( fondazione luigi einaudi, 2020 ), where he discussed “ le regole dell ’ arte ”, the rules of the trade he recommends we follow in “ reconstructing economic growth ”. i refer in particular to section 2. 4 where he sets out his rule 4 : “ deflate all current - price values with the same deflator! ” it is a deep, not easy chapter to read, even if written in his usual crystal - clear english, where the neo - classical theory of his craft seems to me to come to terms with the legacy of the classical economists. i also remember reading his considerations on the minor role of railroads in the italian post unity decades and their factual importance for growth in the united states ( helping to properly interpret fogel ’ s “ provocative ”, as he defined it, major contribution ). indeed his insufficiently quoted 1973 paper on the methodology of counterfactual analysis in the journal of european economic history is a true masterpiece. obviously, other will say much more, and much more effectively, on his contributions to economics and economic history : the symposium ’ s program is rich and well - focused on fenoaltea ’ s main topics of study. however, before briefly talking about what he did with and for the bank of italy, i would like to make one final consideration. stefano fenoaltea was, as i said, very demanding as a scholar, indeed a first - class economist and “ data scientist ”, even if he would have certainly objected to my use of

both in europe and in the united states, the ratio of losses on loans has been lower than that registered during the recession of the early 1990s. there have been no significant episodes of instability. the greater soundness and flexibility of the system derive above all from the reorganization and capital strengthening of intermediaries prompted in many countries by the public authorities since the second half of the 1990s. the strong expansion of the bond market, which has allowed firms to supplement bank loans with funds raised directly from savers, has contributed to the stability of the system. the shocks that have hit the international financial system have been absorbed thanks also to the development of the derivatives market. at the end of 2003 the notional value of over - the - counter derivatives was approximately 200 trillion dollars, nearly twice as much as at the end of 2001. interest rate derivatives account for about three quarters of the entire derivatives market. in the last few years credit derivatives have grown especially fast ; in the middle of this year the notional value of credit default swaps was of the order of 5. 4 trillion dollars. the greater scope for managing risks has made it possible to avoid compounding the difficulties of the real economy and the international political tensions with financial instability. for these reasons as well, the recent phase of cyclical weakness has been shallower than in similar periods in the past. the use of derivatives is not without its own risks. in an environment characterized by abundant liquidity and low interest rates the sharp decline in volatility recorded in recent months on the financial markets of the leading countries is connected to some extent with the search for higher profitability by major international financial institutions through the purchase of high - yield instruments. intermediaries appear to have increased the supply of derivative instruments that provide protection against possible changes in the value of financial assets, thereby lowering option prices and volatility, and to have taken on the related risks. to forestall the potential adverse effects of the growth of derivatives markets, a high level of professionalism on the part of market participants is indispensable. the role of regulatory authorities and central banks is of fundamental importance. supervisory regulations and practices, accounting standards, and the information that intermediaries have to provide are continuously updated, both at national level and in the sphere of international cooperation, to keep up with the development of the markets and contain the systemic risks that are associated with the potential benefits offered by the growing use of derivatives. 5. conclusions efficient intermediaries, developed financial markets