Unfortunately, here in Turkey we did not live in such an  BIS Review 19/2006  1  environment. It was very difficult to predict money demand under a chronically high inflation environment as it was unstable. Moreover, the link between inflation and monetary aggregates was not stable neither. The final alternative was the choice of the inflation itself as the nominal anchor and that obviously refers to the “inflation targeting regime”. In addition to having an anchor, which is highly transparent, inflation targeting was viewed to be superior to all other monetary policy regimes because all available information is used in the monetary policy decision making process. Besides these features, Fred Mishkin (2000) for instance addresses the following favorable aspects of the inflation-targeting regime: “Because an explicit numerical target for inflation increases the accountability of the central bank, inflation targeting also has the potential to reduce the likelihood that the central bank will fall into the time – inconsistency trap. Moreover, since the source of time inconsistency is often found in political pressures on the central bank to undertake overly expansionary monetary policy, inflation targeting has the advantage of focusing the political debate on what a central bank can do in the long run.” On the other hand, as it is widely discussed in the literature, the success of the regime depends on the fulfillment of the necessary preconditions such as central bank independence, sound and welldeveloped financial sector and absence of fiscal dominance.

The role of research in the monetary policy decision-making process becomes even more important under the inflation targeting regime that the Bank of Albania will fully adopt in the near future. Economic literature defines inflation targeting framework, inter alia, as “comprehensive and multi-dimensional information, analyses and statistics”. As in many central banks which adopt the inflation targeting regime, the Bank of Albania has oriented its resources for economic research, mainly to understanding the process of inflation and of its forecasting, and to understanding the transmission mechanism of monetary policy. The building of a macroeconomic model for the Albanian economy is of special importance to the economic research of the Bank of Albania. Moreover, issues related to the real, foreign, financial and the fiscal sectors, as well as other issues related to the improvement of economic statistics are in focus. Undoubtedly, the constant improvement of economic research, of their ethics, quality and significance to monetary policy should be of high priority. The Bank of Albania is conscious of the fact that research in the abovementioned areas should be further consolidated. Dear friends! Allow me to state my opinion that from the strategic point of view the consolidation of research requires the improvement of economic data, the enhancement of cooperation between the public administration institutions and the academia, as well as between various countries, and the absorption and increase of human capacities in this area. Following my speech I would like to briefly explore these three issues. Economic research uses the economic data as its core input.