Anita Angelovska-Bezoska: Statistical implications of the new financial landscape Remarks by Ms Anita Angelovska-Bezoska, Vice-Governor of the National Bank of the Republic of Macedonia, at a panel discussion at the 8th IFC Conference “Statistical implications of the new financial landscape”, Bank for International Settlements, Basel, 8–9 September 2016. *  *  *  Contributors to the note: Ana Mitreska and Maja Andreevska. Since the burst of the crisis, central banking community has been providing unprecedented monetary stimulus with a view of influencing financial conditions and thus reviving the growth. The measures have gone far beyond the pre-crisis mode of operation. If conducting a monetary policy in the pre-crisis period seemed like steering a ship with rudder being enough powerful to protect against the waves, the waves that emerged in 2007–2008 were too strong and reliance only on the traditional instrument posed a risk of sinking. Thus, when the central banks approached/reached zero-lower bound, they were compelled to start experimenting with new policy tools such as balance sheet policies, forward guidance and in more recent period, even more extremely, with negative policy interest rate. Has this monetary accommodation served the purpose of influencing the financial and economic conditions? While there is ample evidence that the measures have succeeded in influencing financing conditions, so far there is not strong empirical evidence on their impact on output and inflation. In fact, despite the ample liquid and ultra-low interest rates, the output growth remains weak and inflation stubbornly low pointing to a weak monetary transmission mechanism.

This new puzzling reality has triggered more profound discussion on the monetary policy frameworks with the academia and policy making community. Are the main traditional monetary policy principles -price stability as a main objective, some form of flexible IT as a most adequate strategy, policy rate as a main instrument- still valid? As crisis clearly demonstrated that price stability is not a guarantee for financial stability and that financial instability can have long lasting effects on output and inflation, the discussions focus on the need to take into account financial stability in the monetary policy frameworks. Thus, the question: Is the so called “flexible IT” enough flexible to deal with the current and future challenges or maybe as some observers have suggested, a thought should be given to the other alternative strategies such as targeting price level or nominal GDP. The discussions even touch upon the question of adding explicit financial stability objective. For example, as Borio (2016) claims ”if mandates (of the central banks) are seen as overly constraining the room for maneuver, revisiting them should not be taboo. After all, mandates are a means to an end.” Concerning the instruments, the current debates focus on whether the unconventional tool kit is temporary, as initially considered, or will become conventional tool supplementing the traditional monetary instrument. This is, in particular, in the context of the ultra-low interest rate environment and still anemic recovery.