investment is being affected to some extent by weak long - term growth expectations, then monetary policy cannot be the whole answer – unless one believes in a very hard form of “ reverse hysteresis ”. the truth is that should weak long - term growth expectations indeed become self - fulfilling, then we would also see signs of hysteresis in the natural rate of interest, which economists frequently call " r - star ". a lower r - star, in turn, would push the interest rate level at which policy becomes expansionary even lower – feeding concerns about the ability of monetary policy to address advanced cases of hysteresis. we don't want the central bank itself to fall into the “ anxiety trap ”. the answer therefore has to address the structural causes of low trend growth and long - term unemployment through policies supporting productivity and minimising both dualities in the labour market and social exclusion. other scratches also need early and effective treatment to avoid becoming scars. for example, insofar as investment is being affected by post - crisis legacies, such as the debt overhang in parts of the private and public sector – the famous fisher - minsky - koo channel of debt deflation – history suggests that effective deleveraging nearly always involves a combination of growing out of debt and writing down debt – which is to say, structural policies are also key. 15 and action also at the eu level is crucial. efforts to complete the single market, for example, would incentivise more firms to invest and grow as they have a larger market to serve and exploit economies of scale. progress with the capital markets union ( cmu ) would likewise help to raise productivity by facilitating capital reallocation. conclusion so, to conclude, the evidence suggests that hysteresis as it is often understood – meaning rising structural unemployment – has not yet materialised meaningfully in our economy. we see more scratches than we see scars. and unlike “ classical ” hysteresis, these scratches are currently reducing price pressures, warranting our currently very accommodative monetary policy stance. we can be confident that this stance will have the desired effect. the ongoing broadening of the recovery, together with the gradual disappearance of downside risks, increases the chances that those who want to work more will be able to do so. this, in turn, will create the necessary price and wage pressures for a return of inflation towards levels closer to 2 %. but should we reach

the pace of innovation ; unfavourable demographic trends in advanced economies ; and the recycling of savings from developing economies toward advanced economies. the rate fall leads to the reduction of space for conventional stimulating monetary policies in the future. the correlation between aggregate demand and the inflation rate has weakened in the short and medium term, as a result of developments in the labour market and increasing integration of the global economy. this phenomenon renders the monetary policy action more costly. the financial innovation and the increasing awareness of the correlation between economic and monetary stability, on the one hand, and the financial system, on the other, have reduced the space for conventional monetary policy instruments. 2 / 5 bis central bankers'speeches despite the complexity, recommendations for dealing with these challenges have been put forward. they range from the modification of the monetary policy mandate to enriching the array of instruments it employs, and its better combination with the macro - prudential policy. i am certain that the issues set out above will be addressed at length during the day. from my perspective, the consensus on the shape of the new ‘ normal ’ of the monetary policy should maintain three key elements : first, avoiding multiple, ambiguous and non - transparent objectives related to the monetary policy. this principle would sustain the credibility of the monetary policy, as a prerequisite for increasing the effectiveness and decreasing the side effects from its intervention. second, acknowledging the limits of the monetary policy, both in the short and medium term, and in the long term. in the short and medium term, the monetary policy often encounters limited effectiveness, especially in the case of financial crises, or negative side effects in the form of heightened risk in the financial system. this limitation stresses the need for supplementing and coordinating it with other economic management policies. in parallel, the monetary policy alone does not have adequate instruments for generating a sustainable acceleration of the growth pace in the long term. this limitation underlines the argument that the monetary policy is not and may not be a substitute for structural reforms. third, in designing the range of instruments at the disposal of the monetary policy, care should be taken to avoid the risk in the central banks ’ balance sheet, which would negatively affect their independence. * * * the experience of the bank of albania in withstanding the crisis and fostering growth in the wake of the crisis illustrates some of the key topics i mentioned above. in response to the aggregate demand slowdown and the subsequent negative implications on employment, soundness of financial balance sheets