words have not lost much relevance. furthermore, the new - keynesian approach is a natural extension of the real business cycle framework to a world with nominal rigidities. as such, it focuses on short - term deviations of the relevant variables from trend. the empirical evidence for the correlation between money and inflation, however, is of a low - frequency nature. in other words, it is more relevant to the trend behaviour of inflation. in a nutshell, given the empirical evidence, it seems that the new - keynesian framework is missing something important in the working - mechanisms of the economy and the inflation generating processes that govern it. something that is – at least - empirically captured by the information content of monetary aggregates. moreover, the merits of analysing monetary developments in a broad framework encompassing credit dynamics allows to extract valuable information with regard to possible financial market tensions caused by the build - up of asset price bubbles. in the light of these considerations it is not so much a question of whether monetary policy in the eurosystem should pay close attention to monetary aggregates. the more relevant issue is how this should best be done, that is, how monetary aggregates should feature in the monetary policy design. here, the challenging task for monetary analysis is how to separate in real time the noise in the shortrun development of monetary aggregates from the part of monetary dynamics that signals risks to future price stability. monetary analysis, properly understood and implemented, can not be a mechanical forecasting exercise. it has to take into account the possibilities of money demand shocks injecting noise into the liquidity - inflation nexus or possible structural shifts in money demand relations. up - to - date monetary analysis should be a broadly - based approach and an ongoing intellectual endeavour. and this is precisely how monetary analysis has developed over the past few years in the eurosystem. in an environment of high financial uncertainty it has identified large liquidity shocks which led to significant portfolio shifts in liquid and secure bank deposits. and it has derived a toolbox of liquidity measures signalling possible excess liquidity. applying this toolbox has allowed to separate liquidity developments rooted predominantly in financial uncertainties from developments signalling more imminent inflation risks. for example the actual strong increase in the money stock m3 which is accompanied by very low level of interest rates and a strong rise in loans to the private sector. all in all, an elaborate analysis of monetary aggregates as well as their components and counterparts is a useful tool for monetary policymakers

such threshold effects in my view deserve further empirical investigation. let me conclude by saying that the experience of the first seven years of emu has shown : • that the monetary analysis plays an important role in our policy strategy and our policy decisions • that the monetary analysis is a challenging and evolving exercise given today ’ s financial market dynamics • but that, even in such an environment, money has an empirically justified informative role.