In particular, the models cannot deal easily with self reinforcing movements away from equilibrium. What at first glance can look like a series of unrelated unexplained disturbances to the variables in the model, could actually reflect some common economic impulse that is not captured by the model. Whether those shocks die away, persist or even build – and therefore how misleading the forecasts that the model produces are – will depend on what’s missing from the model. In fact the areas of the economy which the current generation of models do not cover well include the areas where the imbalances were building up in recent years. The treatment of financial markets and their interaction with the real economy is little more than a side-show. Banks are typically absent altogether. Yet experience has shown that financial markets are particularly prone to these self-reinforcing movements away from equilibrium. We have seen in the last few months alone many examples of that. For example we have seen coordinated sales of assets depressing prices, leading to write-downs on portfolios throughout the system, which in turn have triggered a further wave of selling. These features generally prevented these models from “joining up the dots” in the last upswing and from capturing the impact of tightening credit conditions in the downswing. I should emphasise that the MPC is not a slave to any one model. The current Governor reminds us frequently that: “It is vital never to confuse the world with a model.

They provide preliminary information on expected producer price performance, an important link for the price-setting process in the economy. Consumption and savings tendencies of the population are revealed through relevant indicators. In conclusion, the economic sentiment indicator combines the businesses’ and consumers’ opinions, giving hints of the economic prospects in the short run. I would like to speak at length about the importance and informational utility of the confidence and the foregoing indicators. But, I would rather emphasize the respect the users should pay to such indicators, opting for being oriented to the large information flow through them. I regard this only as the beginning of a comprehensible and transparent cooperation. To this end, other special meetings and activities will follow, enriching various groups of interest with knowledge on business confidence or tendency indicators. I have confidence in the added values they will bring to users’ analyses. But, I advise and require of users, researchers, economic journalists of written and electronic media, students and pupils, businesses and consumers and the broad public, to rightly understand these indicators, before using them. These tendencies have resulted from businesses’ and consumers’ opinions and do not constitute the official stance of the Bank of Albania. The Bank of Albania has built them on the basis of an advanced methodology. It has made use of the information obtained from interviewed businesses and consumers and it has confidence in their qualitative assessments and in those indicators. Their publication enhances the public transparency and makes the decision-making process more comprehensible.