dimitar bogov : seventy years of central banking activities in the republic of macedonia speech by mr dimitar bogov, governor of the national bank of the republic of macedonia, at the ceremony of marking 70 years of central banking activities in the republic of macedonia and order award by his excellency dr gjorge ivanov, president of the republic of macedonia, skopje, 19 october 2016. * * * honorable president of the republic of macedonia, your excellency, dr. gjorge ivanov, distinguished members of parliament and representatives of the government, honored excellencies, esteemed guests, ladies and gentlemen, it is my pleasure and honor, on behalf of the national bank of the republic of macedonia and on my own behalf, to express my sincere gratitude to his excellency, the president dr. gjorge ivanov for the high recognition he has awarded to the national bank tonight. i would also like to thank all of you for being present at the celebration that marks this great anniversary. it is a great honor to be awarded the “ order of merits for macedonia ” by the head of state, in the year when the national bank celebrates 70 years of central banking activities in the republic of macedonia. this award is a great recognition for the overall work of the national bank. it is strong confirmation of the enormous contribution of the bank to the state all these decades – as a central institution of the monetary system and a key pillar of macroeconomic stability. these 70 years, the national bank has gone through various stages of transformation and evolutionary development. it has operated in various systems of social and political order. over the years, it changed both its name and address. it has gradually acquired competencies and built its functions. with the constitution of independent macedonia and the declaration of monetary autonomy, it established itself as an institution – carrier of the functions of a modern central bank. today, i can proudly say that the national bank has grown into a modern and highly professional institution, enjoying credibility domestically, and appreciated and recognized internationally. the national bank has been maintaining price stability in the macedonian economy for 20 years through a stable exchange rate. the inflation rate in the past 20 years has averaged about 2 %, which is a level comparable to developed countries, placing us among the most successful economies in transition. the financial stability has been successfully maintained by promoting sound, safe and competitive banking sector that successfully defy risks and delivers robust credit growth. by achieving these two legally delegated objectives, the national

part of the year if the growth recovery continues apace, and it could interact with the concurrent firming in short - run supply - side costs. indeed, these risks take on a particular relevance at the current conjuncture, because the near - term trajectory for inflation represents one of the key uncertainties for financial markets. markets may be particularly vulnerable to signs of accelerating inflation in the data, which could trigger some volatility in asset prices. 11. fourth, the interaction of the cyclical dynamics with longer - term secular trends on prices is likely to reassert going forward. before covid - 19, many countries faced persistently low price inflation, a trend driven by a complex mix of secular factors, such as technological progress, especially automation and digitisation, wage inequality, and demographic trends. all of these factors bring about important long - term relative price shi s in their wake. but post - covid, their pass - through into a general increase in prices comes against another key set of filters. these include the slope of the phillips curve, central bank ’ s policy responses together with the constraints imposed by elevated public debt levels, and importantly, agents ’ expectations. expectations in macroeconomics 12. this brings me to my second set of comments. one of the truly revolutionary developments in macroeconomic analysis has been the recognition that expectations are central to the behaviour of agents. most of us would probably reach back to at least keynes ’ general theory, as marking its formal induction into general equilibrium macroeconomics. the theory and practice of macroeconomic expectations has evolved quite rapidly since then. in particular, robert shiller and george akerlof were key figures in formalising the idea that changes in expectations may manifest as exogenous shocks rather than factor in endogenously as posited by the theory of rational expectations, thus giving analytical form to keynes'“ animal spirits ” in macroeconomic research. 13. more recently, shiller and akerlof have also led a revival in the interest of expectations in economics [ 4 ]. placing a modern contextualisation to “ animal spirits ”, they describe it as “ a restless and inconsistent element in the economy. it refers to our peculiar relationship with ambiguity or uncertainty. sometimes we are paralyzed by it. yet at other times it refreshes and energizes us, overcoming our fears and indecisions. ” i think we can quite easily relate to such descriptions. we have seen the importance of expectations