independence does not, of course, mean that a central bank ought to be free to choose its operational goals. on the contrary, the modern viewpoint emphasises central bank independence for the reason that only independent central banks are able to act as reliably as possible in the performance of precisely those tasks that have been democratically conferred on them – in other words, to maintain price stability through the conduct of monetary policy. the importance of independence in this connection is that it adds to monetary policy credibility and thereby confidence in the value of money. providing evidence and analysis of the importance of expectations and credibility is certainly among the key issues for which the practice of monetary policy can give credit to economic research done in the last few years. these concepts have in fact dominated theoretical monetary policy research more than anything else at least since the mid - 1980s. the modern macroeconomic picture of the functioning of the economy is strongly forwardlooking. this means that both inflation and overall demand are largely determined by expectations concerning the future. for example, the rate of inflation is determined by what people, companies and trade unions expect of future inflation. the demand for goods and services, in turn, depends on future income and real interest rate expectations. according to modern understanding, the effects of monetary policy are also largely transmitted through expectations of future inflation and of future interest rate levels, and monetary policy can be perceived as being an instrument of exerting influence on the expectations of the public and the market. michael woodford, one of the current leading monetary policy researchers, has noted that very little else than expectations actually matter to monetary policy implications. the credibility of monetary policy means that the inflation expectations of the public and the market are consistent with the central bank's monetary policy objectives so that the public and the market have confidence in the ability and willingness of the central bank to achieve its monetary policy goals. this is of great importance, in practice. a high level of credibility enables the central bank to achieve its objective of price stability through the conduct of even a fairly moderate monetary policy. in contrast, if credibility is weak, defending the value of money will require a heavyhanded monetary policy, which causes shocks to economic growth and employment, without necessarily managing to control inflation. economists say that central banks lacking monetary policy credibility have a problem with commitment. to this problem, economic literature proposes a variety of solutions. perhaps the most famous is the idea presented by kenneth rogoff that the management of an independent central bank should be appointed from

procedures are robust enough, should individual customer systems fail to operate in a year - 2000 - compatible manner. as you all know, the bundesbank is responsible for monetary policy in germany till the end of this year, but will also continue to form part of the banking supervision authority after the start of stage three of european monetary union. in his luncheon address, my colleague mr edgar meister, who is in charge of the bundesbank´s banking supervision department, and chairman of the ecb - committee on this subject, is going to outline the bank ’ s actions in that field in detail. co - ordination with other institutions ’ activities the bundesbank is not only a part of the financial sector, but also a fiscal agent for the government. at the administrative level, the bank isworking closely with other official institutions to ensure the year - 2000 - compatibility of public authorities. the activities of the public financial sector are managed by the ministry of finance. in june 1998, a “ year 2000 forum ” was called into being by the german banking and insurance supervisory authorities, the bundesbank and private banking associations as a platform for regulators and official and private credit institutions to exchange their views and experiences. the government activities relating to the y2k challenge as a whole are being coordinated by the ministry of economics. in this position, the ministry is also overseeing the preparatory activities of the industrial sector in germany. special attention is being given to the readiness of core infrastructure providers because of their major significance for economic activity in general. in particular, given the financial sector ’ s heavy dependence on telecommunications, water, energy and transportation, any failure to meet the year 2000 challenge in any of these sectors could lead to serious disruptions at the national and international levels. in addition to that, it would probably adversely affect all contingency plans of the entire economy. as you know, our latest joint year 2000 council bulletin also focuses on this matter, and i hope that we will have an opportunity to attract public attention in this respect at the forthcoming press conference. preparations at the european level at the european level, the bundesbank, being a member of the escb, is taking part in the activities of the ecb to ensure the year - 2000 - compliance of escb - wide systems and applications. the necessity for the ecb and the escb to give emu top priority poses an additional challenge to their activities in connection with y2k. however, all the new payment and accounting