to closely monitor all relevant economic, financial and monetary developments and act firmly whenever necessary. particularly at the current juncture, we expect monetary analysis to provide us with relevant information about how banks ’ balance sheets are adjusting to the financial crisis and what this implies for credit and money and, eventually, for economic activity and inflation. the present situation is indeed exceptional in this regard, as financial frictions or constraints, which might seem only marginal in normal times, may now suddenly become predominant for understanding and forecasting economic developments. this comes on top of regular empirical analysis and reduced - form models which show systematic and quite robust relationships between monetary and financial developments and future economic activity and inflation. money and credit developments tend to precede long - run inflation developments. current asset prices influence future investment decisions, and measured risk premiums predict future cyclical developments. these aspects are poorly developed in our standard econometric macro - models, as well as in the benchmark new - keynesian model which is so prominent in the academic literature. for the time being, it is difficult to reproduce these statistical relationships and their time - varying nature in state - of - the - art structural models. that is the main reason why the eurosystem's monetary policy strategy now deals with these aspects in a separate pillar. but it would obviously be extremely useful to have models that can integrate these relationships in a structural way. this is clearly the way forward for research on these issues. i firmly believe that this kind of conference helps to encourage research work on such integrated models and that policymakers will eventually benefit from these research efforts. let me conclude by stressing that the financial developments unfolding before us also reveal that we face important challenges beyond the business cycle horizon. indeed, we have to rethink the role of asset prices, risk premiums and money and credit developments for the systematic conduct of monetary policy, for ensuring financial stability and for re - designing the regulation of the financial sector. here again, we could clearly benefit from models which integrate real, monetary and financial developments. if there are actually common cycles in monetary, financial and real economic activity and inflation, it would be appropriate to adopt a longer - term perspective that concentrates on avoiding boom - bust cycles. structural models that incorporate these interactions should be helpful to answer a crucial question : to what extent can monetary policy contribute to preventing excessive liquidity and financial bubbles from building up in prosperous times? they should also help clarify the role of financial regulation and the extent to

which it should be designed to avoid any excessive accumulation of risk during good times and prevent binding capital constraints from adding to deflationary pressures during bad times. it is important to better outline the relative role of monetary policy and financial regulation for price and financial stability, both in terms of strategies and institutional design. in today's integrated financial world, international coordination at appropriate level seems desirable for policies to be effective in this respect. in europe, the organisation of banking supervision at quasi purely national level contrasts with financial market integration and the existence of cross - border financial institutions. the current crisis raises all these challenges much more strongly than before. i am convinced that academic research in these domains will be boosted in the near future and that new and clarifying insights will result from this work. i sincerely hope our conference can help stimulate research in these directions.