Gent Sejko: The need to reinforce understanding of economic
developments and their relation to policy
Welcome remarks by Mr Gent Sejko, Governor of the Bank of Albania, at the 12th SEE
Economic Research Workshop, Tirana, 6 December 2018.
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Ladies and Gentlemen!
It is a great pleasure for me to welcome all of you today to our 12th research workshop. I would
like to express my sincere gratitude to our guests from academia and central banks who for 12
years have made this workshop one of the best and well-recognized economic and financial
research events in Albania and in the region. Let me also thank all of our distinguished chairs,
speakers and discussants for their engagement here today.
The papers that will be presented and discussed during these 2 days will cover a wide range of
economic and financial issues that concern central banks. The topics on monetary policy,
financial stability, risk and novel methodologies are all very relevant to the daily activity of central
banks and as such are very important to us. The Bank of Albania is involved in decision- making
on all these issues and we provide our active support to it through our research. Along with the
papers that are going to be presented today in the panels, we have also decided to include and
present in the poster presentations, tomorrow, some of our ongoing projects. Following this
workshop, the results of these research works will feed into the decision making process and
help the Bank of Albania to make more informed decisions and improve its models and the
efficiency of policy-making. For this reason, I encourage and invite you all to ask questions, to
comment and to assess our work with your opinions and academic proficiency, to challenge our
findings and methodologies.
The nature of our research is undoubtedly influenced by our main mission and prevailing
concerns. It is for that reason that the majority of our research focuses on monetary policy, price
and financial stability, models related to them and the economic events that affect them the
most. Some of the trends that we will discuss today are global and fundamental in nature. They
may not have reached our economies, yet, but they will definitely have a significant impact on our
real economy and financial system in the future. For example, new technologies, such as crypto
currencies, Artificial Intelligence and machine learning, which represent a major challenge, not
only for central banks, will have various implications for monetary and financial stability.
Research related to these new technologies will be beneficial for both advanced and developing
countries.
Unexpected, sometimes new, global or regional events can shock a domestic economy such
that authorities need to intervene with what they already know and have experienced. It is
important to understand the short and long-term implications of the adopted policies in these new
environments. The crisis, for example, had a different impact on the Albanian economy, from
what we had historically experienced. At the time, the Albanian economy did not seem to be
vulnerable to the foreign sector. Subsequent analysis, however, showed that domestic
imbalances had built and, indeed, made the economy vulnerable to a foreign credibility shock. It
is crucial that research in central banks focus on available information and methodologies, which
scrutinize existing paradigms, making this information useful to policymaking, before it becomes
or leads to vulnerabilities. In light of the financial and human capital constraints faced by central
banks in small, open economies, such as Albania, we believe that it is important for these topics
to be discussed, in this workshop, with fellow researchers from academia and other central
banks.
I would like to encourage our researchers to publish their papers in relevant, peer-reviewed
journals as the most important certification of their work. This will make your research projects
more useful and facilitate speedy implementation in mainstream policy making. Despite recent
success in publications, one of the things that I hear the most is that there is not much research
interest in the scientific study of small, developing or emerging market economies like Albania.
From my prospective, I think that there is interest in the scientific study of small, developing or
emerging market economies such as Albania, because of the particular and distinguishing
characteristics of our economy, which can be different from those represented in mainstream
research findings. Distinguishing features such as shallow and narrow financial markets, limited
number of financial instruments, particular behavioural traits of economic agents and distinctive
economic and financial memories, can reveal non-traditional behaviour and interesting
phenomena that do not appear and, are, therefore, not addressed in research findings from
developed markets. The identification of these particular characteristics and their implications for
research findings might be good enough to spark the interest of economic journals and
economic conferences to bring these characteristics to the attention of the research community
and enrich mainstream economic theory.
Just to illustrate a few interesting cases, I would like to remind you that the development of
economic and financial markets in response to Bank of Albania policies has been weak and
sometimes puzzling, making it difficult to interpret using mainstream economic models. The
desire for unhedged borrowers to borrow in foreign currency, the reduced efficiency of
transmission mechanisms in the presence of central bank credibility, the potential role of informal
and parallel markets and informal economic activity, are some examples of interesting traits of
economic behaviour. Several authors have been intrigued by such developments. Hence, they
have conducted extensive research on these phenomenon in similar emerging and developing
economies, which have later seen the light of publication.
Good examples are found in the research work done by the national bank of Austria (OeNB) on
the level of euroization in the region, with interesting results that have helped authorities but have
also increased the interest of other institutions and academics in euroization issues. In addition,
there are increased concerns about financial and foreign exchange market stability in the event of
a sudden reversal of capital inflows to the regional banking system. Recently dramatic changes
are occurring in the global economic environment, including continuing monetary policy
normalization by the U.S. Federal Reserve. These changes can potentially impact small, open
economies and must be understood. Research conducted by the central Bank of Italy (BdI) is
another example of research work, focused on the region, providing an interesting regional
perspective for euro area policymakers regarding their policy decisions and actions. This
research has formally provided researched-based evidence on the implications of their policy
making on the large group of countries in the periphery of the euro area. These are just a few
examples of interesting, useful and publishable research.
This year we have a couple of projects that involve cooperation and joint works between Bank of
Albania researchers and those from other central banks or academia. This is another way to
increase the potential for publication and I would encourage you to increase the amount and
scope of cooperation in research with foreign researchers.
To conclude, I would like to reemphasize that we must enhance the overall efficiency of the
transmission mechanism, and the resilience of the banking and financial systems so that
potential and unexpected shocks do not advance to economic or systemic risk. To this end, we
must reinforce our capacities and our understanding of economic and financial developments
and their relation to policy tools, in order to properly respond to potential risks. This may be done
by improving our current knowledge of past shocks, development, and the implications of
potential shocks. Experience has shown that this knowledge is comprehensive only when it is
the result of a rigorous and competent research process. Last but not least, we have to continue
our policy efforts to strengthen the relationship between researchers and policy makers. I believe
that these efforts can increase both from research and from the end users of the research
product.
Ladies and Gentlemen!
The research papers to be presented in this workshop reflect the serious thoughts and
discussions of expert researchers on major issues. These include not only the work of the Bank
of Albania, but also the work done in other central banks and academia. The topics cover a wide
range of very useful issues. I hope that the research presented at today's workshop will spark
vigorous debate and allow the sharing of diverse opinions that will help each other improve and
strengthen your work form a different perspective. I invite you all and the Bank of Albania's
researchers to use this activity to learn something new, and as a platform to strengthen the
cooperation for your own and your institutions' benefit.
I would like to end my speech by wishing you a productive and successful workshop!