, researchers in this area were able to identify key frictions that make exchange and payment far from trivial. this is not just a theoretical issue that is only relevant to economists in ivory towers. payments and the exchange process are multibillion - dollar businesses and private sector firms are constantly innovating in this area to overcome the types of frictions that are well - known to this group. the knowledge that i have gained from interacting with 1 / 3 bis - central bankers'speeches researchers in this area for the last 20 years has aided me in one of my roles as a federal reserve governor, supporting the fed's oversight of the u. s. payment system. it also guides my thinking about how to make global payments cheaper and faster, which is a key objective adopted by the g20 countries in 2020 and is one fully supported by the federal reserve. keeping with the tradition of studying exchange and payment, several papers to be presented this year focus on how frictions in financial markets, such as asymmetric information or asset illiquidity, matter for the transmission and implementation of monetary policy as well as unemployment and inflation. similarly, it is great to continue seeing work studying frictional intermediation in asset markets and the implications for asset prices and the efficient sharing of risk. these contributions push the frontier of our knowledge, facilitate our understanding of real - world complexities, and inform policy thinking. the workshop's focus on broader financial stability issues is also very important. financial stability vulnerabilities, such as run risk, excessive leverage, and bubbly valuations, could amplify the effect of adverse shocks, potentially resulting in big economic losses and a slowdown in economic activity. understanding the mechanisms that allow these vulnerabilities to grow and transmit stress to the rest of the financial system requires rigorous theoretical research and solid micro - foundations. over the course of this week, we will hear interesting work on this topic that includes research questions such as how a central bank can balance interventions for financial stability and interventions to achieve a certain stance of monetary policy, how banks take risks, and understanding the risk of runs on banks, non - banks, and stablecoins. other concepts are newer and more novel. as the monetary and financial ecosystem has evolved, so has this workshop, bringing together many perspectives and modeling approaches to money and banking theory and its applications. one recurring theme has been to pay special attention to micro - foundations and institutional details, which is important to rigorously

the gst was to bring about a fall in house - building in the second half of 2000 that was much bigger than anyone had forecast or we had ever previously experienced ( graph 1 ). while house - building only comprises 5 per cent of gdp, its fall of 37 per cent in two quarters was enough to outweigh reasonably healthy growth in the other 95 per cent of the economy, and so produce a contraction in gdp for the half - year. there were other factors at work as well, for example, the rising oil price, and there were other parts of the economy that were affected, for example, the labour market. but the figures clearly show that the fall in house - building subtracted 2. 2 percentage points from the half - year ’ s gdp growth, and hence accounted for the overall contraction in economic activity ( graph 2 ). this was a transition effect of the gst, which would soon reverse, and therefore should, in principle, have no effect on our average prospects over the medium term. the problem with transition effects, however, is that they can affect people ’ s confidence and their expectations because at the time no - one can be sure they are transitory. this happened on this occasion as business confidence fell, although not precipitously, over the second half of 2000. when the decline in gdp was revealed in early march, confidence took a sharper turn for the worse. not only did business confidence fall further, but consumer confidence and the exchange rate joined in, and the share market did not escape without damage. this was a period of considerable gloom, when some observers went so far as to suggest that australia might talk itself into recession. in terms of the two components of our view, the second seemed to have completely eclipsed the first, and you could be forgiven for believing that there was no longer any substance to the first view. what we now know is that at precisely the time that confidence was reaching its low point – the march quarter of 2001 – the transitional effects were dropping out of the calculations and the economy was returning to reasonable growth. the march quarter national accounts show this clearly, and a range of other indicators show a distinct improvement from their march low point ( graph 3 ). · consumer sentiment, although declining in the second half of 2000, had remained above its long - term average until it fell sharply in march. it has now regained a level above its long - term average. · the share market has been generally very buoya