ardian fullani : monetary policy, from the past to the present speech by mr ardian fullani, governor of the bank of albania, at the 10th international conference on “ monetary policy, from the past to the present ”, tirana, 26 october 2012. * * * h. e. prime minister, your excellencies ambassadors, honourable minister of finance, honourable governors, distinguished guests and participants, i am very honoured and privileged to open the proceedings of the tenth conference of the bank of albania. this conference is particularly important this year as it is organised in the framework of activities for the 100th anniversary of the declaration of albania ’ s independence and the 20th anniversary of the bank of albania. while retaining the scientific approach, the conference pays tribute to the endeavours made over the years in the monetary and finance aspects. in bank of albania ’ s view, the past is an essential element for the analysis and decisionmaking, and a requisite for theoretic or empirical research. at present, this is a necessity, a challenge that the economics world is facing. to scan, diagnose and cure the situation of the economy, a successful scholar would have to be able to read the human thought. unfortunately, such a doctor does not exist. therefore, in our days, the economic science is turning its attention to individual characteristics such as : history, ethnography and other national traits, considering them as substantial determinants for the stochastic process that leads the behaviour of economic agents. the history plays also a significant role in the formation and development of institutions. the declaration of independence introduced a new era for albanian state institutions, paving the way for the establishment of a central bank, a unified albanian monetary system, and the administration of economic life through the monetary policy. despite its short life, the national bank established in 1913 is a cornerstone in the history of the albanian state. the then prime minister, ismail bej vlora said about it : “ i say the affair of the bank is praiseworthy ; for albania, it is a second victory, after freedom, from both the economic and political perspective. ” the events that followed the declaration of independence, in the national and international aspect, have played a crucial role concerning the nature and character of these institutions and, at the same time, determined the nature of the monetary policy. economic and political partnerships, and the charisma of the albanian statesmen to build a modern society, led to the establishment of the first

to tear down balkan barriers and raise, instead, a comprehensive functional infrastructure, a regional payments system, a regional energy system, a regional market of financial products and lastly but may be most importantly a regional market of production factors. in martin luther king ’ s words “ we may have all come on different ships, but we ’ re in the same boat now ”. dwelling a little longer on the regional theme, i would like to briefly touch on another problem. the experience of the past year shows that as a result of regulatory capital requirements imposed by euro area supervisors, various bank groups reduced their participation not only in the euro area markets but also in our region. this process, known as deleverage, yielded negative consequences. to prevent such phenomena, policymakers and supervisors of partner economies need to cooperate more closely. in this regard, the vienna initiative is a good but limited cooperation platform. it is conceptualised as an instrument to address emergency crisis situations, whereas the current situation requires platforms for dialogue to enable effective and persistent communication among policymakers. this dialogue should aim at preventing undesired mutual effects ; a more ambitious programme, on the other hand, would aim at drafting and implementing coordinated initiatives of mutual interest. nonetheless, potential emergencies arising from contamination from euro area partners would create additional difficulties and huge effective costs for the economies of the region. therefore, we call for the establishment of appropriate mechanisms and instruments for liquidity provision by the european union to peripheral euro area countries. i believe that the financial integration makes this common defence more urgent, through the right understanding of the common fate of our trade partner economies. i take the opportunity, given the presence of many central bank officials from the region, to call for an en bloc coordinated position in this regard. the experience of the latest crisis showed that the countries which had more space to react, in the form of healthier fiscal balances or the financial system, and in the form of more reliable public institutions, were able to cope better with the consequences of the crisis. this lesson should not be neglected. among other things, it implies timely measures and, through counter - cyclical policies, establishment of the necessary space to buffer potential shocks. likewise, it implies ongoing efforts by macro and micro - prudential policies to minimise financial misbalances across all the sectors of the economy and the financial market. these policies, which are often known as “ leaning against the wind ”, have been and will continue to be part in the logics behind