domestic demand. * * * - of the three perspectives cited here it is savings and investment behaviour that is likely to get top billing in connection with the current imbalances. europe, with its moderate level of savings, has been somewhat amazed by the lofty savings rates of many asian countries and the low savings rate of the usa. are asia's robust savings rates fuelled by an authentic need to save or is this a case of weak consumption partly due, for example, to various kinds of regulations? - the high degree of global saving has been prominent in recent discussions but, as voiced for instance by the imf, the global savings rate has in fact declined in the last few decades. apparently, the reduction has taken place mainly among households, so that the savings pendulum has shifted to the corporate sector. corporate profitability has remained good in most countries, which is surprising, in the light of the heightened international competition. it may be that labour's pricing power has suffered even more from tighter competition due to globalisation than has that of companies. - as a result, the problem – as well as the reason for the low level of international long - term interest rates – appears not to be a savings glut but rather an investment drought. this is partly because investment has shifted to " lighter " objects, where prices have declined, whereas the euro area especially needs more investment in equipment and machinery. this is because of the simple fact that new technology should be introduced swiftly. given the low level of investment activity in the corporate sector, an abundance of financial resources has been channelled into the housing market, which has fostered sharp increases in house prices in many countries. as a result, households may have gotten into debt problems. - sluggish investment in the euro area in particular raises questions in a situation in which the factors that generally encourage investment are in place : overall corporate profitability is good, interest rates are low, credit availability is good, and liquidity is abundant. a decline in capital - intensive production and a rechannelling of investment to countries with lower costs, such as the new eu member states, may have contributed to the low level of investment. increasingly fragile demographics may be another reason for the subdued propensity to invest. * * * - one way of addressing both the global imbalances and the low level of investment in the euro area is to boost productivity in the euro area service sector. poor performance in the service sector is the main reason

current financial crisis has brought the financial stability tasks to the discussions of central banking objectives and practices. new frameworks and tools for macro - prudential supervision and new regulations on the financial system have taken a central position on current policy and research agendas. this development has come as a response to the financial crisis. price stability as the macroeconomic objective continues to play an important part in central banking. inflation targeting with a credible and independent central bank may well survive as the framework for monetary policy. however, interconnections between financial and macroeconomic stability are one topic that needs more attention in the future. redrawing the boundaries between fiscal and monetary policy is a second topic that needs attention in the future. there are two reasons for this. first, the roles of fiscal and monetary policy in the great recession and in exit from the current stagnation need further assessment. second, the sovereign debt crisis and the rising debt levels in many advanced market economies may well influence the boundaries between monetary and fiscal policy in the coming years. references benhabib j., g. w. evans and s. honkapohja ( 2012 ), liquidity traps and expectation dynamics : fiscal stimulus or fiscal austerity?, nber working paper nr. 18114. brunnermeier m. k., t. m. eisenbach and y. sannikov ( 2012 ), macroeconomics with financial frictions : a survey, mimeo, march. christiano l., m. eichenbaum and s. rebelo ( 2011 ), when is the government spending multiplier large?, journal of political economy, vol. 119, 78 – 121. fernandez - villaverde j., g. gordon, p. a. guerron - quintana and j. rubio - ramirez ( 2012 ), nonlinear adventures at the zero lower bound, nber working paper nr. 18058. bis central bankers ’ speeches gertler m. and p. karadi ( 2012 ), qe 1 vs. 2 vs. 3 … a framewrok for analyzing large scale asset purchases as a monetary policy tool, mimeo, march. reinhart c. m. and m. b. sbrancia ( 2011 ), the liquidation of government debt, nber working paper nr. 16893. bis central bankers ’ speeches