if pensioners ’ incomes are not protected against inflation. and if that is the case, the ecb ’ s focus on price stability can be seen from another important angle : it reduces one of the potential problems an aging society is confronted with. see deutsche bundesbank ( ed ) : investing today for the world of tomorrow, 2001. l. svensson : price level targeting versus inflation targeting, jmcb, 1999, pages 277 – 95 ( here : p. 278 ). ladies and gentlemen, for those among you who were already convinced that aging is an important issue for a central bank, i hope i have reinforced your views. and for those of you who are sceptical about this subject, i hope it pays to stay.

a rate of economic growth that permits a sufficient income transfer from the working population to pensioners which does not cause the “ inter - generational contract ” to collapse under its own weight? looked at from the perspective of monetary policy, the questions are more specialised, but just as fundamental. first, i ask myself whether the aging process in society is bound to change the indicators for central bank policy. second, we need to consider whether the economic consequences of the aging process will also have direct or indirect implications for the monetary transmission process. and third, you could even ask whether the shifts in the age structure are at all relevant for the central banks ’ objectives. let me illustrate the first complex, namely the indicators, using the example of monetary policy in the eurosystem. as you know, the european central bank follows a two - pillar strategy. under the first pillar it defines a reference value for monetary growth. the comparison between actual monetary growth and the reference value is a key guide to assessing the medium - term outlook for price risks. the reference value for monetary expansion is derived from the trend rate of real gdp, the trend in the velocity of money and an inflation rate that appears acceptable under stability considerations. other things being equal, if the working population grows more slowly or declines, this will eventually dampen potential output. however, an increasing amount of savings and a larger capital stock could counteract the effects of a shortage of labour. countervailing effects could also be generated by technical progress. on the one hand, a shortage of labour may stimulate technical progress. on the other hand, the aging population may constitute an obstacle to technical progress. at any rate, my children certainly surf the internet a lot more skilfully than their aging father! i would add that the velocity of money may likewise be affected by the consequences of the aging process. thus both inside and outside europe wealth has been found to affect money demand, or the velocity of money. if the aging of a society leads to more capital - intensive production and to increased asset accumulation, the relationship between wealth and income should also change, and this in turn might have an impact on the trend rate of the velocity of money. concerning the ecb ’ s analysis of the second pillar, i would like first to draw your attention to labour market conditions. the impact of a changing age structure on the labour market has been debated very intensively in the united states. however, the institutional conditions in the usa are very different from those in