lawmakers should give to central banks. doing justice to this vast body of work in a few sentences is impossible. i will therefore limit myself to a few key elements. characteristic of ben ’ s work is the critical analysis of ideas that have become fashionable in the profession. in the 1970s and 80s, when monetary targeting was in its heyday, ben argued that central banks were too focused on the money supply and did not pay enough attention to other variables. in a number of influential papers, he showed that the amount of outstanding credit in the economy may be a useful predictor of future output and prices. ben concluded that credit should play an important role in central banks ’ decision making. the extent to which central banks should pay attention to credit aggregates remains a hotly debated question to this day. ben was among the first to highlight their potential significance for monetary policy. another example of ben ’ s tendency to go against the mainstream is his critique of the use of rational expectations in macroeconomic models. when the rational expectations revolution transformed the field of macroeconomics in the late 1970s, ben remained sceptical. he criticised the assumption that economic agents form their expectations based on a perfect understanding of how the economy works. these models did not address the question of how economic agents derive this knowledge in the first place. more recently, the literature has begun to develop models with forward - looking agents that have a limited understanding of how the economy works. this research programme is very much in the spirit of ben ’ s early criticism. page 3 / 4 a final example of ben ’ s willingness to challenge the accepted wisdom of the day is his reservations about inflation targeting. when one central bank after another started to adopt inflation targeting in the 1990s, ben became one of the most prominent critics of this new monetary policy strategy. his concern was that inflation targeting would lead central banks to focus single - mindedly on price stability. in doing so, ben feared, they might lose sight of their ultimate goal of promoting economic well - being more broadly. ben is widely recognised as one of the world ’ s leading macroeconomists. however, his research interests go far beyond that. ben is a polymath, something that has become rare in modern academia. his writings cross academic boundaries between economics, philosophy, history and religion. an excellent example of ben ’ s interdisciplinary work is his book ‘ the moral consequences of economic growth ’, published in 2005. economists have written countless papers on how to increase growth.

jean - pierre roth : autonomy on the edge of a large monetary zone - the swiss experience address by mr jean - pierre roth, chairman of the governing board of the swiss national bank, at the leonard davis institute for international relations, hebrew university, jerusalem, 28 may 2006. this paper was prepared with the support of ms petra gerlach - kristen, economic research section, swiss national bank, zurich. * * * this is my second visit to israel and i am delighted to be back. i am especially happy to speak at this institute which, according to the will of its founder, leonard davis, should promote a better understanding of israel external policy. the first time i was in jerusalem was in november 2004 when the bank of israel celebrated its 50th anniversary. the swiss national bank is itself approaching an important anniversary. next year, it will have been 100 years since we opened our doors for business. since 1907, our institution has seen large changes in the monetary environment. when the snb began operating, the swiss franc's parity was defined in terms of gold and silver. in the early 1920s, switzerland adopted a gold standard and fixed exchange rates remained the dominating feature of its monetary regime until the collapse of the bretton woods system. since then, we have learned how to conduct our monetary policy independently and how to live with flexible exchange rates. our policy was guided by monetary targets until the end of the 1990s, and only recently, like most central banks, have we shifted our focus to price stability more directly. i would like to share with you some of the lessons we have learned from that period with flexible exchange rates and, in particular, review our recent experience of living on the edge of the euro area. living on the edge of the euro area as you can imagine, the introduction of the euro in january 1999 constituted a sort of revolution in our monetary environment. for the first time in our history, we are now surrounded by a single currency area, which also happens to be the destination of 60 % of our exports. in fact, our situation, in terms of economic power, can be compared to that of the state of massachusetts in the united states. can you imagine the state of massachusetts having its own currency? the natural question is : how do we come to the conclusion that monetary independence is still desirable? indeed, given our geographical position, we, swiss, frequently have to explain why we decided not to adopt the euro or not to peg our currency to the euro,