such a strategy may well be unable to shield the economy from the costs deriving from the bursting of the bubble, costs which in many cases may simply be staggering. also, the sheer size of the macroeconomic shock associated with the bursting of the bubble may be sufficient to plunge the economy to the zero lower bound. this is the bad news. the good news, however, is that, first, many of the principles underlying pre - crisis monetary policy frameworks are still perfectly valid, so that, in a sense, we do not have to “ reinvent the wheel ”. second, the adoption of macro - prudential policies aimed at taking care of the buildup of disequilibria in asset markets, or within specific segments of such markets, offers the possibility of effectively tackling the problems which led us to the current predicament. thank you for your attention. references altunbas, y., gambacorta, l., and marques - ibanez, d. ( 2010 ), “ does monetary policy affect bank risk - taking? ”, ecb working paper n. 1166, march 2010. bis central bankers ’ speeches borio, c., and white, w. ( 2003 ), “ wither monetary and financial stability? the implications of evolving policy regimes ”, presented at : monetary policy and uncertainty : adapting to a changing economy, a symposium sponsored by the federal reserve bank of kansas city, jackson hole, wyoming, august 28 – 30, 2003. claudio borio and haibin zhu ( 2008 ), “ capital regulation, risk - taking, and monetary policy : a missing link in the transmission mechanism? ”, bis working paper n. 2588, december 2008. ciccarelli, m., maddaloni, a., and peydro, j. - l. ( 2009 ), “ trusting the bankers : another look at the credit channel of monetary policy ”, ecb, mimeo. dubecq, s., mojon, b., and ragot, x. ( 2010 ), “ fuzzy capital requirements, risk shifting and the risk taking channel of monetary policy ”, banque de france, mimeo. friedman, m. ( 1968 ), “ the role of monetary policy ”, american economic review, 58 ( 1 ), 1 – 17. international monetary fund ( 2011 ), imf performance in the run - up to the financial and economic crisis : im

christian noyer : monetary policy – lessons from the crisis speech by mr christian noyer, governor of the bank of france and chairman of the board of directors of the bank for international settlements, at the bank of france / deutsche bundesbank spring conference on “ fiscal and monetary policy challenges in the short and long run ”, hamburg, 19 may 2011. * * * ladies and gentlemen, it is a great pleasure for me to be here today at this conference, which has provided a lot of stimulating ideas on monetary and fiscal policy frameworks. in my address i will start by briefly discussing some general principles underlying the conduct of monetary policy which have not been altered by the financial crisis, in particular the absence of a long - run trade - off between inflation and unemployment, the benefits of low and stable inflation for economic activity. central banks, who bear the ultimate responsibility for inflation because of its monetary nature, ought to encode all of these principles into the fabric of monetary policy frameworks. i will then talk about some of the crucial lessons from the crisis : that macroeconomic stability by itself does not guarantee financial stability and that the very same monetary policy, which successfully delivers inflation and output stability in the short - run, may sow the seeds of future disruption at longer horizons. a key lesson of the crisis is that inflation forecasts at ( say ) the two - year horizon are not a sufficient statistic for monetary policy, and that a thorough and broad - based analysis of underlying trends in monetary and credit aggregates may help in identifying longer - term risks to price stability. the second lesson of the crisis that i will stress today is that, contrary to the widespread view of the years leading up to the crisis, the zero lower bound of interest rates is not an issue of purely historical interest, and is rather relevant for contemporary policy - making. i. general principles of monetary policy not altered by the crisis the financial crisis has not invalidated the general principles underlying the design of monetary policy strategies during the previous two decades. first and foremost among them is the absence of a long - run trade - off between inflation and unemployment, also known as the “ natural rate hypothesis ”. 1 underlying the natural rate hypothesis is the key concept of monetary neutrality : in the long run, the phillips curve is perfectly vertical, which is another way of expressing robert lucas ’ s famous dictum that “ you can ’ t buy a permanent economic high just by printing money ”. a second key principle of monetary policy,