Ultimately, my main conclusion from the crisis so far is that flexible inflation targeting, applied in the right way and using all the information about financial factors that is relevant for the forecast of inflation and resource utilization at any horizon, remains the best-practice monetary policy before, during, and after the financial crisis. But a better theoretical, empirical and operational understanding of the role of financial factors in the transmission mechanism is urgently required and needs much work, work that is already underway in academia and in central banks. The outcome might very well be that financial factors are considered to have a larger role in affecting the transmission mechanism and as indicators of future inflation and resource utilization. If so, central banks would end up responding more to financial indicators, in the sense of adjusting the policy rate and policy-rate path more to a given change in a financial indicator. However, this would not mean that financial factors and indicators have become independent targets besides inflation and resource utilization in the explicit or implicit centralbank loss function. Instead, it would be a matter of responding appropriately to financial indicators in order to achieve the best possible stabilization of inflation around the inflation target and resource utilization around a normal level over time. References Adrian, Tobias and Hyun Song Shin (2007) “Liquidity and Leverage”, Journal of Financial Intermediation, forthcoming. Available as Federal Reserve Bank of New York Staff Reports 328.

In the fourth quarter, however, it showed improvement. Indirect data obtained from the import of consumer goods, fiscal indicators and consumer confidence indices signal the recovery of consumption during this period. On the other hand, the presence of uncertainties for the future amongst Albanian consumers continues to discourage consumption and dictate the consumer’s behaviour towards saving. BIS central bankers’ speeches  1  Private investment is assessed as improved in the fourth quarter for certain branches of the economy, while across the sectors of the economy the improvement remains low. Furthermore, below potential growth and low capacity utilisation rates have reduced incentives to undertake new investments. The contribution of fiscal expenditures to aggregate demand growth has been positive over 2011, reflecting a moderate fiscal stimulus, especially during the first and fourth quarters of the year. The fiscal policy has been prudent with a view to keeping fiscal indicators within sound parameters. Budget deficit for 2011 was ALL 45.7 billion, remaining within the envisaged level. Its performance has reflected low rates, both in terms of fiscal income and expenditures, recording an annual growth of 1.8% and 3.7%, respectively, in 2011. Monetary indicators performance suggests the existence of contained monetary inflationary pressures. The annual growth rate of M3 monetary aggregate was 9.2% in December, in line with the deceleration over the second half of 2011. According to our analysis, the expansion of money is in conformity with the demand for real money in the economy.