Dear guests, I hope that with my introductory speech I have identified issues that are in the focus of interest of the economic policy-makers in the transition countries, and which I expect to be further elaborated by the participants in the conference. Today we have with us guests with diverse backgrounds. We have presenters from EU institutions, from old and more advanced new EU new member states, as well as from the South Eastern European countries, which  14  Loko B. and Tuladhar A. (2005), "Labor Productivity and Real Exchange Rate: The Balassa-Samuelson Disconnect in the former Yugoslav Republic of Macedonia" IMF Working Paper No. 113 and Jane Bogoev, Sultanija Bojceva Terzijan, Balázs Égert, Magdalena Petrovska, "Real exchange rate dynamics in Macedonia: Old wisdoms and new insights", http://www.economicsejournal.org/economics/discussionpapers. 6  BIS Review 74/2008  are determined to work hard for European integration. I hope that we can share the experience of the existing EU member states, including the more advanced transition countries, in the process of EU and later EMU integration. I am sure that South Eastern European countries have a lot to learn, both in terms of successful strategies and steps and mistakes to avoid. I am also sure that our capability as central bankers to successfully face the challenges of faster accession towards the EU and EMU will be enhanced by this and similar conferences.

In particular, it features a flexible and shock-dependent medium-term horizon, meaning that monetary policy does not  http://www.ecb.europa.eu/press/key/date/2017/html/sp170330.en.html[03.04.2017 15:53:14]  Central bank independence revisited  automatically respond to shocks, unless there is a risk of these shocks becoming embedded in inflation expectations. And it also features a monetary pillar. Under this pillar, trends in credit markets are monitored, and factored into policy decisions, even when inflation has not moved. [57] As a built-in feature, this ensures a certain leaning-againstthe-wind attitude in policymaking. However, although the ECB’s two-pillar monetary policy strategy incorporates financial stability considerations, macroprudential policy cannot seek to impose its needs on the monetary pillar. Against this background, one may wonder why microprudential supervision was not considered sufficient to address financial stability issues. One reason is that microprudential supervision is aimed at ensuring the soundness of individual financial institutions by mitigating their vulnerability to idiosyncratic risks. However, setting up a regulatory framework which guarantees the soundness of individual banks does not automatically ensure the soundness of the financial system as a whole. Financial institutions’ inter-connectedness contributes to generating systemic risk, even when such institutions, taken in isolation, seem sound. Moreover, since financial institutions tend to engage in similar investment strategies both in upturns and downturns of the financial cycle, over time common exposures to similar sets of risks can create financial imbalances or credit disruptions, leading to pro-cyclicality. When a shock surfaces, interconnections may contribute to amplifying expansionary and contractionary phases of the financial cycle.