just ignore what he says, just as the campaign? jct : no. what he, and the french government will say will be examined very carefully through the european institutions. we have 13 executive branches that are discussing together. they have themselves their own organisation : the euro group of eurozone finance ministers is a meeting that certainly is important. and you have the council at the level of heads of state and government ft : the french said [ in the run up to the euro ], “ when the euro enters force there will be a serious political dialogue between the eurogroup and the european central bank ”. but my impression today is it ’ s a bit sterile, it ’ s a dialogue of the deaf. you want these structural reforms, that ’ s what you ’ re putting on the table, and they want lower interest rates. obviously that ’ s a crude formulation, it ’ s simplification, but that ’ s … jct : yes, i would say it ’ s an over - simplification. first of all, governments have an immense stake themselves in us ensuring price stability. they have an immense stake themselves in us being credible in delivering price stability. this is contributing to a financial environment which is, for most of the countries of the euro area, exceptionally favourable, because it incorporates inflation expectations – over five years, ten years, 20 years – that are in line with our definition of price stability. several countries are issuing securities, issuing bonds, of a duration of 50 years. it is because we are credible over the next 50 years that they can obtain the favourable financing which corresponds to that. and they know that. don ’ t forget, also, that all the national central banks that are now making up the eurosystem were made independent more or less early, but banque de france, for instance, was made independent by the will of the french democracy as early as 1st january 1994. it was on the basis of a bipartisan accord between the left and the right. and it called for a very solemn moment in this active democracy that i mentioned, and particularly it called for a change of the constitution of general de gaulle, the constitution of the fifth republic, to permit independence of the central bank. and that was done five years before having the ecb itself being created. i would also like to mention, because you mentioned the relationship between the executive branches and this institution, that we have an organisation of meetings, of physical encounters which is probably the most

##udential policy experiments in mapmod ” imf working paper. bis central bankers ’ speeches earlier and decisive action seems to be paramount in this respect, necessitating reliable early warning tools. the beneficial impact of higher credit depends on the extent to which credit booms contribute to a permanent financial deepening. 15 it is therefore encouraging that we have new “ early warning ” models and considerable work on the topic ( alessi and detken ( 2013 ), 16 alessi et. al. ( 2014 ) 17 and gregory et. al. ( 2014 ) 18 presented here at the mars conference. these analytical tools exploit multiple and novel data sources, variables and models in order to generate accurate crisis predictions. many of these tools are already in use in regular macro - prudential surveillance work at the ecb. let me summarise. systemic risk is a largely endogenous phenomenon due to the inherent procyclicality of the financial system. preventing instability from occurring is better than dealing with its consequences and therefore leaning against the financial cycle should be the key objective of macro - prudential policies. of course, this implicitly assumes that we have effective and efficient tools at our disposal. i will now turn to the issue of effectiveness. what instruments should we use to lean against imbalances? understanding transmission channels of macro - prudential policies in advanced economies, actual experience on the use of macro - prudential policies is relatively limited, with the exception of the administrative interventions that were usual in many european countries in the 60s to the 80s, like limits to credit or minimum down payments for consumer credit. these instruments played a containment role on the credit cycle but these were times of less sophisticated financial systems. nowadays, the transmission channels of stylised macro - prudential instruments are far more complex which makes their calibration especially hard. policy makers will inevitably have to start with some trial - and - error approaches, that will help identifying and addressing the main operational issues. having said that, i would also underline that mars and relevant research in the macro - prudential policy area have shed light on the transmission channels of financial instability as well as of selected policy and regulatory instruments. but enhancing our understanding with more analytical work is very much needed to support the choice and implementation of policy instruments. macro - prudential policies may address financial imbalances building up in specific sectors, by using targeted instruments. this could facilitate the analysis of transmission mechanisms. at the