all, short - run monetary developments are often affected by transitory shocks. we need to identify and account for such temporary “ special factors ” or “ distortions ” that may affect monetary developments and blur their information content. second, and more permanently, it is necessary to disentangle, in monetary and credit developments, those which reflect structural and permanent changes from those which simply result from movements in the level of interest rates and the position in the economic cycle. finally, we must be able to assess whether these developments result from money supply shocks, in which case they clearly entail some risks to price stability, or whether they are caused by money demand shocks that may raise the desired level of money balances without necessarily impacting aggregate demand. such demand shocks can be triggered by structural changes in the behaviour of economic agents or result from portfolio shifts or financial innovations in the context of financial globalisation. there are indeed some signs that a money demand shock occurred at the beginning of the 2000s in the euro area, as illustrated by a structural shift in the trend velocity of money, which summarises the relationship between money, output and the price level. 5 one possible consequence of current events in credit markets may be to trigger a re - intermediation process, i. e. an expansion of banks'balance sheets which may further complicate our reading and interpretation of monetary and credit dynamics in the months to come. conclusion there is no doubt that globalisation has impacted in various and non - trivial ways the functioning of our economies. in doing so, it has blurred the information content of many important variables or indicators relevant for the monetary policy maker, making monetary policy probably more complex in a context of increased uncertainty. economic theory usually distinguishes between parameter and model uncertainty. in the presence of parameter uncertainty, i. e. when the policy maker is uncertain about the impact a policy instrument has on the economy, economic theory suggests that it is optimal to respond more cautiously than would be the case in the absence of uncertainty ( this is the well - known brainard conservative principle ). by contrast, model uncertainty would require more active monetary policy, the idea being to insure oneself against particularly bad outcomes. i will leave it to your wisdom to guess in the present circumstances which of these two approaches would be preferable. thank you for your attention. bordes, c., clerc l. and marimoutou v. ( 2007 ) : “ is there a break in equilibrium velocity in the euro

point, the agents try to maximize their own compensation, given the rules of the game. sometimes they discover vulnerabilities in these rules, which they then exploit in a way that is not optimal from the perspective of their own organizations or society. if the damage caused is significant enough, the rules themselves adapt, driven either by internal governance or by political and regulatory forces. still, it is possible that at different times in this process, the rules do a better or worse job of managing the incentives of the agents. to be more specific, a fundamental challenge in delegated investment management is that many quantitative rules are vulnerable to agents who act to boost measured returns by selling insurance against unlikely events – that is, by writing deep out - of - the - money puts. an example is that if you hire an agent to manage your equity portfolio, and compensate the agent based on performance relative to the s & p 500, the agent can beat the benchmark simply by holding the s & p 500 and stealthily writing puts against it, since this put - writing both raises the mean and lowers the measured variance of the portfolio. 7 of course, put - writing also introduces low - probability risks that may make you, as the end investor, worse off, but if your measurement system doesn ’ t capture these risks adequately – which is often difficult to do unless one knows what to look for – then the put - writing strategy will create the appearance of outperformance. since credit risk by its nature involves an element of put - writing, it is always going to be challenging in an agency context, especially to the extent that the risks associated with the put - writing can be structured to partially evade the relevant measurement scheme. think of the aaa - rated tranche of a subprime collateralized debt obligation ( cdo ), where the measurement scheme is the credit risk model used by the rating agency. to the extent that this model is behind the curve and does not fully recognize the additional structural leverage and correlational complexities embedded in a second - generation securitization like the cdo, as opposed to a first - generation one, it will be particularly vulnerable to the introduction of a second - generation product. 8 see amromin and sharpe ( 2012 ), and greenwood and shleifer ( 2012 ). jurek and stafford ( 2012 ) argue that implicit put - writing of this sort accounts for much of the apparent measured alpha in hedge funds. to be clear on terminology : a