It is my pleasure to welcome you to the 2006 Conference on Macroeconomic Policy Challenges for South Africa. This is a first for the South African Reserve Bank and we would like to make it a biennial occasion.An important goal of this event is to bridge the gap between economic theory and practice. The theme of this year’s conference – Macroeconomic Policy Challenges for South Africa” – hints at a historic opportunity for South Africa as it prepares to embrace the many challenges facing this country, including the Soccer World Cup in 2010, and the Accelerated Shared Growth Initiative of South Africa. Any deterioration in the global economic environment may cause financial markets to become more volatile, and that could pose a threat to the stability of the African continent. The lingering resentments in the Middle East have made that region more unstable than ever, and the growing sense of distrust has raised questions about the stability of emerging markets in general. These problems are exacerbated by balance-of-payments disequilibria and other challenges confronting an inflation-targeting regime. We must rise to these challenges by embarking on some reforms within our own country. Macroeconomic policy debate should therefore be encouraged to stimulate new ideas.We invited prominent speakers to cover different fields of interest within the field of macroeconomics and received a significant number of high quality abstracts. This conference attracted attention from other parts of the world and we foresee that this will become an important event on the calendar of economists of note. The South African Reserve Bank will issue a special publication of the proceedings. I sincerely hope that theconference will become an important driving force in shaping policy in South Africa and will stimulate economic debate in this country.The South African Reserve Bank wants to encourage research on the critical issues related to economic growth, price stability and prosperity in this country. To that end I would like to thank all the participants who are contributing towards building this economy by actively participating in shaping new ideas.T T MboweniGovernor of the South African Reserve Bank