job entrusted to the mpc - not people appointed for their political convictions, nor representatives of particular economic or social interests. in that respect i think we have been extremely well served : the members of the committee have been invariably well qualified for the technical jobs they've had to do ; but more than that they have typically known enough, including about the inevitable uncertainties i have referred to, to know when they could be reasonably confident in their views and when they were guessing - as we all have to do at the margin. the committee has been divided, generally very narrowly divided, in its forecasts and policy judgements more often than not since we started. that is both natural and healthy. but what is important is that the debate has typically been measured and reflective - and remarkably free of acrimony and dogma. and that to my mind is fundamental to the strength of the process. the second corollary is that the mpc process should be transparent and that its members should be individually and collectively publicly accountable for their decisions. transparency is assured by the publication of detailed minutes of our monthly meetings just two weeks after the event, and by the publication of our quarterly inflation report. these publications, and the continuous stream of speeches and interviews all around the country by members of the mpc, ensure broad accountability to the public at large. we see this as very much in our own interest, as monetary policy is likely to be more readily accepted - and more effective - if people generally understand what it is we are doing and why. but, beyond this, we publish each individual mpc member's voting decision each month - which they can then be expected to explain. our procedures ( though not our decisions ) are regularly reviewed by the bank's court of directors, and reported on to parliament through the bank's annual report. we regularly appear before the treasury select committee of the house of commons and the economic affairs committee of the house of lords. and, as chairman of the mpc, i am required to write an open letter to the chancellor if inflation strays by more than 1 % either side of the 2½ % target, explaining why inflation was adrift, how long the divergence might last, and the action we propose to take to bring it back on course. so far as i am aware, taken as a whole, these arrangements provide far greater transparency of, and greater accountability for, the monetary policy process than anywhere else in the world. but let me rev

see deutsche bundesbank, problems of international comparisons of direct investment flows, monthly report, may 1997, pp 77ff. see deutsche bundesbank, german balance of payments in 1998, monthly report, march 1999, p 43, particularly p 55. see, for example, the conference volume heinz hermann, robert lipsey ( ed ), foreign direct investment in the real and financial sector of industrial countries, berlin 2003. the latest survey of the german chamber of industry and commerce shows that 39 % of respondent enterprises indicated cost savings with respect to wages, taxes and levies as the most important reason for foreign direct investment. furthermore, the liberalisation of capital movements, the creation of a single european market as well as the privatisation of state enterprises have played and continue to play an important role for investing abroad. part of the outcome of this has been the creation of new markets and the provision of market access to foreign investors. one example is the telecommunication industry which in the late 1990s was a very active investor. however, many other service sectors such as financial services and energy were also heavily involved in fdi. the opportunity to gain access to new markets plays a key role for fdi. 10 those enterprises which want to be successful in the world markets must be present on - site. direct investment and external trade often go hand in hand. it is thus not surprising that there is a relatively close correlation between german foreign direct investment and german exports. 11 econometric studies confirm this. 12 at year - end 2002, for example, almost 86 % of german fdi went to industrial countries and just over 14 % to reforming and developing countries. these groups of countries accounted for 82½ % and 17½ % of german exports respectively. particularly, a gravity model analysis of the strong german foreign trade with the central and east european countries shows that german fdi in these countries is an important factor. 13 now i ’ d like to address very shortly the third and final reason for our interest in the topic “ multinationals and international integration ”. it ’ s a political one. as we all know, the focus of the debate on direct investment has shifted towards the effects of fdi on the domestic economy, particularly on employment. in germany, this was sparked by the eu enlargement. this development has directed attention towards the ongoing process of enterprises shifting production to central and eastern europe, a process which has been going on for many years now. a similar debate on the advantages and disadvantage