Ardian Fullani: Needed - a new way of thinking, a new approach to economic policy
Speech by Mr Ardian Fullani, Governor of the Bank of Albania, at the 6th South-Eastern
European Economic Research Workshop, organized by the Bank of Albania, Tirana,
19 November 2012.
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Dear workshop participants,
Dear central banks colleagues,
I am very happy to be here today, in this 6th South-Eastern European Economic Research
Workshop. This Workshop is an annual event that Bank of Albania organizes, aiming to
successfully bring together researchers and their work from the region and beyond. We are
very glad for your personal contribution and your institutions' commitment to this activity. The
participation map extends every year and we take this development as a sign of recognition.
This activity takes place as Albania celebrates its 100 anniversary of independence, which
happened on 28 November 1912; we are, therefore, very happy to welcome you on the
occasion of this very important event.
The South-Eastern European Economic Research Workshop provides a platform to discuss
and, most importantly, improve our work. It also provides a platform that contributes to the
extension of regional cooperation in the area of research, making an additional contribution
to the cooperation in other important areas of Central Banking in the region.
As I have previously mentioned, countries of the SEE region are similar in many aspects
including the state of economic problems and economic research. We are focusing on finding
the problems in the existing models. However, the actual economic conditions, the state of
policy variables and level of policy instruments represent tails events rather than normal
behaviour. Therefore, our empiric understanding lies outside the set of solutions offered by
models, which are built and tested in normal times. Above all, the biggest challenge is
adopting a new philosophy and a new way of thinking into policy design and implementation.
Central banks are perfect environments for these new ideas to emerge and develop. They
bring together distinguished analysts and the research community with a demanding set of
problems that need solutions. Its network is available to researchers while financial,
technological, statistical and intellectual support for research is practically limitless.
Moreover, the research community in central banks has the opportunity to directly influence
policy design and implementation. This particular characteristic endows central bank
researchers with the opportunity to implement their findings and practically test their
conclusions in practice.
In this respect your conclusions have far reaching impact on people's welfare and economic
outcome. Therefore, you have an immense responsibility to adopt the best practices of
academic methods and writing and make your research available to scrupulous critique at
the bank and outside it as well as for the research community. Always be reminded that
when your research and analysis have potential effects on other people's lives.
I sincerely invite you to adopt this spirit of cooperation during the proceedings of this
workshop, as you have always done in the previous workshops.
I would also like to remind you of the relatively long journey that you have taken together with
the Bank. The quantity and quality of your work has increased and improved throughout this
journey. Therefore, I would like to challenge you to reach beyond this particular event and
present your work more frequently in similar activities in the region or in the EU. I would like
to encourage you to spend more time and efforts to disseminate and implement your
research findings within the institution.
Results and conclusions should not be your last station. Organize activities that focus on
explaining and disseminating results and research techniques to the rest of the bank. Raise
the awareness on research developments and extend your cooperation with your colleagues
within the bank. I invite you to extend cooperation beyond borders. Benefit from this
wonderful network that we have created and extend the spirit of cooperation beyond
workshop participation by engaging in joint research projects with national and regional
focus. You will be amazed by how much you can learn.
Finally, I would also like to encourage the others economists of the bank to crush the
monotony of repeated dull analysis and frequent reliance on untested hypothesis. Enrich
your work with results of recent research, engage in research work yourself. Devote more
efforts and energy to the study of economic phenomena and the way they affect your work.
Research is not and should not be an exclusive monopoly of monetary policy and financial
stability. It takes many forms, and should extend across all areas of central banking. Few of
the materials that will be discussed today and tomorrow illustrate this initiative very well. I
hope there will be more similar examples in future workshops.
The presentations and discussions today and tomorrow address a wide range of issues,
reflecting the nature of problems that our economies are facing.
I understand from the programme that our guests' focus of research is similar to the one at
the Bank of Albania. During the past year, we have focused on financial stability and
monetary policy, trade integration and trade relations, and the modelling of stochastic
economic process. But above all, the crisis, its implications, the channels of transmission,
and policy response have become the focus of empiric and theoretic research in the central
banks and academia during the last 4 years. The results of this research and analysis have
taken central banks and their monetary and regulatory policies beyond what was considered
sacred limits of monetary policy. However, this has not proven very helpful for the economy.
It is now five years since the crisis began and the more authorities deal with short-term
problems of growth and unemployment, the more they reveal long-term imbalances and
structural problems of national and global scale. In the meantime, we still cannot fully define,
understand and model the economy in its true stochastic form.
Typically, long and deep economic and social crisis have become the breeding ground of
new philosophies of economic thinking, which, in turn, have encouraged significant policy
changes and opened the road to economic prosperity. Adam Smith, John Keynes, Milton
Friedman, and their economic thinking have emerged in the dusk of big crisis. Unfortunately,
we are still waiting for a new philosophy; so the question arises: where is our philosopher?
We clearly need a new way of thinking, a new approach to economic policy, a lot of new
ideas.
These new ideas are not easily discovered. They do not pop up themselves; they hide in the
layers of economic and financial data, history of economic developments and economic
thought, and philosophy of social interaction in the macro and microeconomic scale. It is not
surprising that economists and politicians have started to challenge some beliefs that are
regarded as universal economic truths. For example, GDP and growth are challenged as the
best measure of happiness and prosperity, globalization is challenged for its externalities in
the labour market and inequality, inequality itself is under investigation as a potential culprit
of economic slowdown. Economic research must broaden its scope to consider all these
areas in their work. Research must be designed like an increasing spiral, where the newly
gained knowledge in philosophy, economic history, empiric research and application of
mathematic and statistical models must return to the starting point to confront the set of all
new and old problems, prove the generality of its application, and evaluate the set of
potential externalities.
As I mentioned at the beginning, this is the 100th jubilee of Albania's independence and our
annual conference this year focused on the development of monetary policy during the last
100 years and paid particular attention to the impact that domestic and international political
and economic events have had on the nature of the central bank and its monetary policy.
Addressing the mixture of historic and economic developments, the large variety of monetary
regimes, abrupt swings in economic, politic and philosophy systems, and modern economics
was amazingly refreshing, interesting, and thought-provoking. It certainly deserves more
attention.
Our traditional approach to research has largely contributed to our understanding of
monetary and financial stability issues and models with a large set of parameters, forecasts
and shock analysis. It has enriched the envelope of models and methodologies that are
available in the process of policy design and implementation and has increased our
confidence. However, it is time to go deeper in the understanding the fundamental of
economic behaviour as an individual and social phenomenon. This understanding requires,
among others, proficient research in economic history and economic behaviour and
economic welfare. I reiterate you do not have to do this alone and isolated.
International scientific collaboration allows for increased access to research resources and
infrastructure. Teaming up with professionals with complementary skills, benefitting from
knowledge generated beyond boundaries is a modern and effective endeavour. We hope this
Workshop as well as other conferences and activities we are hosting throughout the year will
contribute to this end.
I wish you great success during the Workshop proceedings and in your everyday efforts. It is
my hope that getting to know each other's work will lay the foundations for further future
cooperation.
Thank you!