, job availability and better living conditions migrated so far to the eu - 15. this has led to severe tensions in many industries pushing wages and unit labour costs up. high corporate profits have provided a cushion yet, but, if this situation continues, many companies will be forced to raise prices to remain profitable. 4. rising unit labour costs. growing tension on the labour market is present in all cee countries, but baltic and balkan states seem to be the most threatened by rising labour costs. annual average dynamics of unit labour costs in the second quarter of 2007 in cee accounted to 8 per cent and in the group of baltic and balkan states the figure was over two times higher. this shows that sooner or later ( rather sooner ) enterprises will stop cutting their profit margins and will be forced to pass growing operational costs on consumers. 5. challenges to keep fast productivity growth. we live in a global knowledge economy, which is driven by innovation – technological, business - process or customer related. the crucial factor to succeed in the global knowledge economy is the country ’ s ability to develop intellectual capital. only those who understand the importance of innovations for growth will thrive and prosper in the coming decades. unfortunately, cee region lags badly behind the leaders in terms of its current and future ability to generate innovation. one of indicators measuring current ability to innovate is the number of researchers. in the mid - 1990s cee - 4 ( the czech republic, hungary, poland and slovakia ) and asian nies had similar number of researchers per million people, while two years ago nies had almost twice as many persons employed in r & d per million people in comparison with cee - 4. future knowledge potential of particular country or region can be measured by tertiary enrolment ratio. tertiary enrolment ratio in the cee - 4 countries improved to 50 percent in 2004, but still remains well below 62 percent in the eu - 15 and 82 percent in the united states.. because of a relatively small population and a number of structural deficiencies it is very unlikely, that increase in the number of students in cee - 4 that have occurred in recent decade will translate into higher innovation potential in the coming years, unless a dramatic change in policies in cee - 4 is made. this is also confirmed by a dramatically low number of patents registered in the cee countries and extremely low number of scientific publications. as the ability to generate great ideas in the cee region is limited, it seems that

central bankers go on holidays? surely, a good rest is always an attractive option, yet some questions about it remain unresolved, so the holiday should not be too long. first, there is the question of flexible versus strict inflation targeting 9, i. e. a way of incorporating output and employment fluctuations into monetary policy decisions. it - guru lars svensson claims that in practice “ all real - world inflation targeting is flexible inflation targeting ” 10. by that he means that considerations on output ( and employment ) are always present in the decision - making process. however, though most central bankers agree that limiting output and employment fluctuations should enter the policy equation, there ’ s no consensus about how to do it in practice. no wonder some central banks find it difficult to clearly express their approach regarding output stabilisation. a promising example in this respect is the norgesbank, which is explicit about its flexible approach. norwegians state openly that they “ operate a flexible inflation targeting regime, so that weight is given to both variability in inflation and variability in output and employment ” 11. also the monetary policy objectives of the fed are formulated in this vein 12. it is worth stressing however that the degree of appropriate flexibility in a particular country may depend on the duration of low inflation 13. thus the norwegian case may not be applicable to countries during disinflation or shortly thereafter. another important question regards the choice of the targeted price index. should it be headline inflation which is more familiar to the public or core inflation which is less vulnerable to short - term deviations? and what about asset prices? should they be included in the index? the question of including asset prices into the targeted price index is related to a wider policy debate, namely on the “ although macroeconomic performance improved in most non - industrial countries over the past decade, countries adopting inflation targeting have, on average, outperformed countries with other monetary policy frameworks. ” - imf, “ inflation targeting and the imf ”, march 2006. empirical evidence show also that inflation targeters achieve better sustainability records in terms of disinflation, though the findings are statistically not robust – hofstetter m. “ why have so many disinflations succeded? ”, documento cede 2005 - 65, november 2005. see : corbo v., landerretche o., schmidt - hebbel k. “ does inflation targeting make a difference ” in : loay