are subject to a variety of measurement errors. as has been demonstrated extensively in the literature, the empirical proxies used to capture the output gap are subject to constant revision. 20 clearly, policy - makers who rely exclusively on such assessments of the cyclical position can be seriously misguided in their real - time conjunctural assessment. to the extent that these indicators are central to the implementation of flexible inflation targeting, over - reliance on them may have led to an over - activist and at times inappropriate monetary policy stance. in particular, policy makers might also have formed an overly benign assessment of the situation prevailing in 2002 – 2004 if they relied excessively on output gap measures, as these measures were based on overly optimistic assumptions about potential growth. for instance, in early 2003 the imf estimated the us output gap for that same year to be slightly above 2 %. in early 2006 the estimate was revised down by 1 percentage point and one year later by another 1 percentage point. with the benefit of hindsight it turned out that in 2003 the output gap was basically nil ( see figure 3 ). 21 such considerations plague other composite indicators derived from the literature, such as the natural real interest rate. understanding current inflation developments can also prove challenging. headline inflation rates may be volatile in the short term, reflecting the impact of temporary relative price shocks. 22 monetary policy - makers need to look through such noise. but conventional measures of so - called “ core inflation ” can themselves be misleading. for example, measures that exclude energy prices can offer a false impression of the underlying dynamics of inflation if energy prices are trending upwards. clearly, policy - makers with a mistaken view of the conjunctural situation are liable to make policy mistakes. in a stylised taylor - rule setting, errors in assessing inflation or the output gap will lead to flawed guidance on interest rate decisions. such considerations may have led to overly accommodative monetary policy prior to the financial crisis. see : a. orphanides and s. van norden ( 2002 ), “ the unreliability of output gap estimates in real time ”, review of economics and statistics 84 ( 4 ), pp. 569 – 583 ; and a. orphanides and s. van norden ( 2005 ), “ the reliability of inflation forecasts based on output gap estimates in real time ”, journal of money, credit and banking 37 ( 3 ), pp. 583 – 601. l.

frameworks, it is important that there are no obstacles in the transfer of collateral. in the euro area, continuous attention is needed on ensuring that there are sufficient settlement links between ( i ) csds, that these have appropriate operating hours to address the needs of the market, and that triparty collateral management services are further developed. on the latter, i pause for a moment to recall that one important milestone was achieved earlier today with the signing of a memorandum of understanding between ( i ) csds, banks ( in the name of the european repo council ) and a ccp, with the respective parties committing to work further on a solution for triparty settlement interoperability. triparty settlement interoperability is an important initiative that will help foster greater financial integration and harmonisation, reduce fragmentation and help to create a single european repo market. the aim of the “ tsi initiative ”, as you are all well aware, is to bring together borrowers and lenders, regardless of where the underlying liquidity or collateral is held, thereby avoiding the build - up of silos of collateral in the market. more should be done, and i therefore fully subscribe to the actions identified by cogesi. in particular, i encourage the group to further increase the transparency, clarity and understanding of the linkages between collateral frameworks, regulatory rules and market practices. we need also further improvements in the processes that support the mobilisation of collateral. the eurosystem will do its part in 2014, by abolishing the so - called repatriation requirement. that will allow for more efficient mobilisation of assets for use in eurosystem credit operations via the correspondent central banking model ( ccbm ). the eurosystem is also integrating the support of triparty collateral management services on a cross - border basis into its central bank framework and of course t2s, which will go live from 2015 to 2017, will support more efficient cross - border collateral transfer. from the industry, we may expect to see further improvements in the services that support a more optimal use of collateral assets. bis central bankers ’ speeches in this regard, i encourage you to analyse solutions to optimise the use of collateral. i am very interested in the group ’ s deliberations on the tools to increase the efficient use of collateral, and the implications of collateral transformation services. against a background of increasing demand for collateral, cogesi should drive further development of effective procedures for enhancing collateral