ardian fullani : monetary & financial stability policies – lessons from the crisis speech by mr ardian fullani, governor of the bank of albania, at the 8th international conference of the bank of albania : " monetary & financial stability policies – lessons from the crisis ", tirana, 17 september 2009. * * * honourable mr. prime minister, dear governors, distinguished guests, i feel deeply privileged to open the proceedings of the 8th international conference of the bank of albania entitled : “ monetary & financial stability policies – lessons from the crisis ”. i hope the proceedings will help the participants better realize the issues facing the global economy during this period and draw the proper lessons. i am personally convinced that the prominent speakers ’ reputation is a guarantee in this regard. before i invite the guests to discuss the features and lessons drawn from the global and regional crisis according to their viewpoints and experiences, allow me to say a few words on this conference. the topic chosen to be dealt with in this conference is at the forefront of the institutions ’ agenda, responsible for macroeconomic policies and financial system surveillance at a national and international level. the panic that followed the lehman brothers ’ failure almost a year ago transformed the turmoil in the u. s. mortgage loan market into a genuine globalwide financial crisis. the integration of the financial markets caused the crisis to spread swiftly, while the vital role of the credit system in free market economies transformed it into a global recession, hitting the east and south - east european countries as well. the experience gained so far has allowed a better acknowledgment of the causes that led to the crisis and the factors that triggered and accelerated its spreading, and a reassessment of the diverse supervisory and regulatory practices. i would like our discussions on the crisis to focus on two directions : what we learnt and what we could not learn from the crisis. among the numerous aspects debated at length, i would like to distinguish three of them : the dichotomy between the state and the market, the degree of confidence in the forecast models, and the importance of coordinating the pre - emptive measures. with respect to the “ state vs. market ” debate, i would like to re - stress my unwavering confidence in the market and our commitment as policy - makers to make it operate by the rules and efficiently 24 / 24. the last few years have witnessed the rapid development of forest models and techniques. avoiding the tendency to underestimate their high importance to the day -

days. this would serve to discuss about their findings, improve them and assess their effectiveness for the bank of albania ’ decision making. the bank of albania deems that the economy and the financial system are currently sound and in line with our expectations and forecasts. the present indicators of prices and economic growth are not yet at their long - term equilibriums ; however, they do not present surprises that would call for immediate attention of the bank of albania and change of monetary and financial stability policies. they are in line with our expectations and are very well serviced by the actual decision - making course of action. in concrete terms, consumer prices, the main objective of the monetary policy, returned to an upward trajectory and are expected to progressively approach the 3 % target. economic activity 1 / 2 bis central bankers'speeches remains stable, at positive figures, reflecting a slight upward trend, and is expected to perform along similar trends in the future. nevertheless, the current figures appear still far from the optimal conditions and there is place for further improvement in both the inflation rate and the economic activity. in addition, there is place for faster growth of lending and monetary expansion, yet, subject to the situation in the balance sheets of the private sector and banking system. the fall in interest rates is transmitted to all segments of the financial market, contributing to the decrease of existing credit costs and providing the possibility for investments in new projects. the monetary policy transmission has helped somewhat to mitigate the negative effects and improve the households and firms ’ balance sheets. also, it is noteworthy that, during this time, lending in the domestic currency has increased ; this is translated into a success for both the transmission of the monetary policy and the soundness of the financial system and the private sector. the monetary policy decisions have helped the economy by not causing adverse effects on the banking system soundness indicators. an accommodative monetary policy, potentially, has side effects ; but, they have not materialised thanks to the duly and prudential management of the monetary policy intervention. in our daily work, we pay special attention to maintaining a sound system and our decisions take into account potential implications on the banking system at home. in perspective, the short - term shocks of the past have turned into stable equilibriums in the medium term and the non - traditional policies, which are turning into conventional instruments of policy making in our partners, have encouraged a new behaviour among economic and financial agents. these changes affect the bank of albania ’ s ability to