Gent Sejko: Rethinking economic policies and central banks'
methodologies
Speech by Mr Gent Sejko, Governor of the Bank of Albania, at the 9th Workshop of
Economic Research in Southeastern Europe, Tirana, 4 December 2015.
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Distinguished guests, Workshop participants, Ladies and Gentlemen
I consider it a privilege to address you all for the opening of the 9th South Eastern European
Economic Workshop, here in Tirana. In line with the tradition of this event, we once again
attempt to complement the need for research with the need for policy novelties. Please allow
me to say that judging from the contributions and the presence in this workshop, I am
confident that this event will fulfill its commitments and expectations and provide all of us with
useful and practical lessons.
It is important to emphasize the global and national economic background in which this event
takes place and these are very difficult times. The global recession remains present. The
European core was shaken not only by events in Greece, but also in Spain, Portugal and
Italy, and remains fragile. The recent developments from the Middle East will add to
hardships and overstretch available resources. Therefore, economic activity might take a
longer time to return to its previous glorious days. Despite the fact that our region has
managed to remain on the positive side of economic growth, the hardships were quick to
reach us as well. Economic and income growth is not what it used to be and inflation
continues to break new low records.
Central banking has received its share of challenges and hardships as well. Continuous
standard monetary policy easing was coupled with micro and macroprudential policy
interventions. Even interventions like quantitative-easing in the euro area were brought into
attention and implemented, but still the general economy seems slow to react properly.
Furthermore, the issue is not about monetary policy alone. The non-standard interventions
(micro and macroprudential policies) require special attention and resource allocation in
order to properly manage their implementation and impact on the general economy.
Additionally, maintaining financial stability requires additional central bank to prevent possible
negative spillovers from the financial sector toward other areas of the economy.
In short, the general economic difficulties have placed central banking at a cross-road in
relation to its principles, policies and management. Moreover, even though the requirement
to maintain price stability remains appealing, dangers do not occur only from inflation.
Exchange rate fluctuations have provided additional hazards, particularly within economies
where foreign currency transactions dominate.
Additionally, financial stability challenges are present even at higher levels. Credit demand
reaction to continuous monetary policy stimulus has been sluggish, reflecting the poor
expectations of consumers and enterprises on future developments. Supplementary easing
of the general requirements for obtaining credits did not have the expected impact and that
can be observed in the recent dynamics of aggregate demand components. Unquestionably,
financial agents are into profit making and it is their duty to search and find alternative clients
if the traditional end-users are unwilling or uncommitted to new credit. Besides that, the need
for financing will stimulate end-users to search and find alternative sources. This raises the
question at more strategic levels associated with credit efficiency allocation and informality.
Allocation deficiencies tend to intensify in times of crises reflecting usually a condition of
over-lending in certain sectors, which are most probably with poor spillover effects on the
rest of the economy. In the meantime, the sectors that are truly productive might remain
detached from financial sources, thus with little stimulus to move forward. Even worse, these
sectors might address to informal lenders to compensate for their financial needs. This is
also an activity that booms in times of crisis and, since these activities are entirely
unmonitored by financial regulators, they could dangerously harm and diminish the ability of
financial regulators to influence the economy at large.
Having mentioned all these arguments, I would like to return to our event and emphasize
how the challenges mentioned above are translated into challenges for central banking
research. I am most glad that all issues have been addressed at the different panels of this
workshop. Additionally, although we are yet to hear them, I am most confident that the policy
implications suggested in these contributions are relevant and important. The question
remains: are they practical and can they be easily adapted?
This question involves the major challenge for research both at this workshop, and in
general. It is your duty to provide a balance between the academic properties of research
and its practical endeavors. The academic properties will guarantee a standard of research
enriched with methodological novelties and points of view. Furthermore, the practical
patterns would allow policy makers to fully and easily implement your policy proposals
making them relevant.
This is the main expectation that I have from this event and I am confident it will be fulfilled at
the end of these two days.
Without further ado, I would like to give a warmly welcome and congratulate you all for your
good work and for being here today.
Thank you.