, in the presence of aggregate supply shocks, attempts by monetary policymakers to reduce the volatility of inflation over time could be associated with higher volatility in unemployment, and vice versa. john's visual depiction of this policy tradeoff has come to be known as the taylor curve. interestingly, john's work anticipated the possibility that improvements in the conduct of monetary policy or changes in the structure of the economy could result in a shift of the taylor curve - - that is, a change in the ability of policy to smooth both inflation and employment. and indeed, what economists have dubbed the great moderation - - a simultaneous reduction in the volatility of inflation and the volatility of real economic activity - has occurred in the united states and in many other economies over the past quartercentury. over the course of the 1980s, john continued his work on rational expectations issues and monetary policy and macroeconomics more generally. he also began to broaden his focus to matters of international economics. he developed a multi - country rational expectations econometric model - - a truly ambitious undertaking, especially in light of the limited computing capabilities of the era. by this point in his career, john had firmly established his reputation as a leader in the profession. in 1989, john became a member of the first president bush's council of economic advisers. during the next four years, he played a key role in shaping the administration's positions on macroeconomic, fiscal, international finance, and trade issues. the u. s. economy was entering a difficult period at that point. among other problems, significant pressures on bank balance sheets were beginning to emerge that would damp economic growth for the next several years. while dealing with the serious economic issues of the time, john and the other members of the council simultaneously produced an impressive manifesto for policymaking. they developed a rules - based approach to the conduct of monetary and fiscal policy and published it in 1990 in the economic report of the president. that essay laid the foundation for what is perhaps john's most well - known contribution to economics - - the simple description of the determinants of monetary policy that eventually became known as the taylor rule. 1 john's analysis triggered an avalanche of studies examining the stabilization properties of taylor rules in the context of macroeconomic models. other work investigated the ability of variants of the taylor rule to describe empirically the actual course of monetary policy in the united states and in other economies. the taylor rule also

mario draghi : keynote speech at the eurofi financial forum keynote speech by mr mario draghi, president of the european central bank, at the eurofi financial forum, milan, 11 september 2014. * * * summary we are facing a set of conditions – low growth and low inflation, high debt and high unemployment – that can only be addressed by concerted action on both the demand and supply sides of the economy. this requires that all actors – both at national and european levels – play their parts in line with their respective mandate as laid down in the eu treaties. no monetary or fiscal stimulus can be successful if not accompanied by the right structural policies – policies that foster potential growth and instil confidence. investment has been one of the great casualties of the crisis. from peak to trough business investment in the euro area decreased by around 20 % since 2008, against 15 % in the 1992 recession. we will not see a sustainable recovery unless this changes. a decisive rise in investment is essential to bring inflation where we would want to see it, to kick - start the economy and to bring down unemployment. there are two key areas where national and european level government action can help revive investment. first, the regulatory environment should be made more favourable to economic growth. second, companies need to have access to more diversified sources of financing : the launch of a capital markets union could contribute to achieving this. it is an idea that the ecb fully supports. the development of the market for simple and transparent asset backed securities deserves particular support. member states should consider the provision of public guarantees to support lending to small and medium sized enterprises. there also needs to be a consistent and credible application of the stability and growth pact across time and across countries. within the existing framework, countries should explore how to support productive investment. in monetary policy, we have deployed a number of non - standard tools to ensure our very accommodative monetary policy stance is transmitted to the real economy. last week, the governing council decided to start the purchase of certain high - quality asset - backed securities and covered bonds in october. senior tranches of such abs have proven to be high quality assets. alongside our targeted longer term refinancing operations, we expect these measures will enhance the functioning of monetary policy transmission, provide further accommodation now that we are at the lower bound, and have a sizeable impact on our balance sheet. * * * ladies and gentlemen, it is a pleasure to be here tonight with you in milan