energy. i am happy that the excellent list of speakers allows us to touch upon all these key challenges today. ladies and gentlemen, before giving the floor to mr. david kotok from the global interdependence center, the co - organizer of today's event, i would like to speak briefly about our cooperation with the global interdependence center. the gic is a philadelphia - based nonprofit think tank with the mission to " encourage the expansion of global dialogue and free trade in order to improve cooperation and understanding among nation states, with the goal of reducing international conflicts and improving worldwide living standards. " this is indeed a noble goal in today's changing world full of new challenges and, unfortunately too often also conflict. eesti pank is honored to have been included in the gic list of cooperating institutions for a number of years already. our people have participated in gic events both as speakers and members of the gic delegation. we have first - hand experience in how dedicated the gic is in fostering the cause of free markets, cooperation and liberty. ladies and gentlemen, thank you once again for coming here today. i am now most pleased to invite david to say a few words of welcome on the behalf of the gic.

a function of the shocks hitting the economy. as well, the band or confidence interval around the target is held constant, even though it may sometimes be beneficial to worry less about inflation volatility in a period of highly volatile, but transient, shocks. finally, the time horizon for returning inflation to target is usually held constant. as a consequence, it can be too short to factor in fully the longer - run disruptions associated with, for example, building asset imbalances. the current parameters are not arbitrary. in canada, the 2 - per - cent target for the total consumer price index reflects the measurement bias inherent in the cpi, the risks associated with the zero lower bound and concerns about downward nominal wage rigidities. the 1 - percentage - point range around the target reflects the unconditional variance of the inflation process. 2 the 18 - to 24 - month time horizon reflects the lagged response to monetary policy action. 3 this inflexibility has significant value. it provides clarity of objectives and holds central bankers accountable. when policy lacks credibility, it can be beneficial to have simple inflexible elements in the framework because they demonstrate the policy - makers'commitment to that policy. if the inflation target is achieved, it enhances the credibility of the central bank and creates a virtuous circle whereby increased policy credibility further anchors inflation expectations, which then contribute to a more stable macroeconomic environment, which, in turn, enhances policy credibility. we should be careful neither to underweight the value of resulting simple heuristics nor to minimize the risks of complicating them. it can also be argued that the range should be conditional on the nature of the shock to inflation. note that in canada, unlike some countries, the cpi fully captures the direct effect on inflation of changes in house prices in the " owned accommodation " component of the cpi, which includes mortgage interest cost, replacement cost, property taxes, house insurance, maintenance and repairs, and " other owned accommodation expenses. " this component represents 16. 5 per cent of the cpi basket. when then to be flexible? once credibility is achieved and the operation of the framework better understood, could credibility be retained if the parameters were adjusted to reflect the characteristics of the shocks hitting the economy at any particular time? flexible inflation targeting works well with temporary or one - off shocks. whether it can adapt to address unique but longer - lived shocks ( such as an asset boom or secular changes wrought by globalization ) is the