##closures and we will soon launch a dialogue to find solution in favor of the macedonian economy. hence, there should not be any doubt that in future the national bank will “ hear the voice ” of the banks. but, also, it should be clear that the national bank does not discuss the monetary policy measures with anybody, not even the banks, before it makes a decision to adopt them. they are at the absolute discretion of the national bank. this is a worldwide practice. neither the european central bank, nor the czech central bank, nor any other central bank throughout the world consults or informs the commercial banks on the monetary policy measures before it makes the decision. distinguished ladies and gentlemen, i dedicated most of my last year ’ s speech arguing that the stable denar exchange rate is still the best solution for the macedonian economy. in the public debate concerning this issue last year, on many occasions, i presented additional arguments that underpin my view. on this occasion i will discuss the two theses recently presented by the advocates of floating denar exchange rate. the first thesis is that the floating exchange rate will ensure more relaxed monetary policy, and accordingly, higher economic growth. the second thesis is that the denar exchange rate is not realistic, i. e. it is overrated. yet, so far, i still have not heard any explanation of how would the floating exchange rate relax the monetary policy, nor arguments supporting the view that the denar is overrated. considering the first thesis, note that the exchange rate regime does not determine whether the monetary policy will be restrictive or relaxed. you could have floating rate and restrictive monetary policy, or fixed exchange rate and relaxed monetary policy. what is important for the monetary policy is whether there are imbalances in the economy or not. just because of the absence of imbalances in the macedonian economy, as i elaborated at the beginning, we can afford relaxed monetary policy. conversely, due to the nature of our economy, the floating exchange rate would fuel uncertainty and create imbalances and high inflation, the alleviation of which would require extremely restrictive monetary policy. concerning the overrating of denar exchange rate, i have presented, on several occasions, data on denar real effective exchange rate that indicate quite the opposite. on this occasion i will only refer to the market. it is the market that determines whether a commodity is overrated or not. since the beginning of august last year, the national bank has only once sold

euros on the foreign exchange market in the amount of euro 4. 5 million, and has purchased euros, approximately twenty times, on the foreign exchange market in the amount of euro 170 million. even countries that apply floating exchange rate much frequently intervene by selling foreign currency on the foreign exchange market, in order to defend their currency. bis central bankers ’ speeches distinguished ladies and gentlemen, euro area debt crisis is our greatest challenge in the period ahead. due to the large scale trade, the recession in the euro area which is very likely, has adverse effects on the real sector of our economy. in such circumstances, other than the maintenance of inflation rate at the level of the euro area, we will use the monetary policy together with the macro - prudential policies to preserve the balances in the external and the banking sector. in a medium run, the challenges of the banking sector again arise from the euro area, related to the implementation of basel 3 standards. it is very likely that it will cause “ deleveraging ” in the european banks, hitting seriously the lending activity of banks in the south east europe. we closely monitor this process and get ready to respond adequately in order to protect the macedonian economy against severe impacts. therefore, the cooperation between the national bank and the commercial banks will be even more important. thank you for your attention. bis central bankers ’ speeches