to the slow economic performance and the perceived uncertainties about the future. its prospect in the medium run remains unclear. private investments remain at low levels, in the presence of partial utilisation of production capacities, uncertainties about foreign and domestic demand, and tightened lending terms by the financial sector. public sector demand was also low during the third quarter and did not, therefore, contribute to higher aggregate demand. as at end - october, the budget deficit for this year was about 19. 0 % lower than a year earlier. the fiscal policy applied during the three first quarters of the year materialised in the annual fall of public spending for this period, whereas income growth was low and budget deficit was in check. on the other hand, the fourth quarter of 2012 and year 2013 are expected to be characterised by upward fiscal spending and budget deficit. this fiscal policy increases the macroeconomic stimulus in the short run ; however, it should be sensitive to the need for medium and long - term stability of the public debt. bis central bankers ’ speeches foreign demand was the main driver of economic activity in the third quarter of the year. latest foreign trade data confirm the same trend for the successive period. thus, in october, the trade deficit continued the corrective trend, narrowing down to 10. 3 % in annual terms. its performance has reflected mainly the good performance of exports, which maintained positive rates of their annual growth, 12. 0 % in this month. imports have also contributed to narrowing the trade deficit, contacting 2. 3 % in annual terms, in this month. the analysis of monetary indicators points to low monetary pressures on prices. higher money supply, the m3 aggregate, continued to decelerate in october, settling at 6. 2 %. in particular, lending to the private sector slowed down significantly. annual credit growth for the private sector was 2. 4 % in october, reaching its all - time low. to a large extent, it is influenced by the low demand of households and business for loans, as reflected by the performance of consumption and private investments. on the other hand, the banking system continues to apply additional prudence with regard to lending, albeit it is under good liquidity and capital conditions. financial markets are characterised by downward liquidity risk premiums. interest rates in the inter - bank market fell even further in november, reflecting the ample liquidity and eased monetary conditions. in the primary market, government security yields continued to fall. moreover, the interest rate on deposits and

ardian fullani : effects of the exchange rate regime speech by mr ardian fullani, governor of the bank of albania, at the lecture of the governor of the central bank of the republic of turkey, mr durmus yilmaz, entitled " current global financial crisis and recent developments in the turkish economy and monetary policy ", istanbul, 24 september 2009. * * * ladies and gentlemen, it is my great pleasure to give the greeting speech in this joint meeting, in which our dear and honourable friend, the governor of the central bank of the republic of turkey, mr. durmus yilmaz, will address very important theoretical and practical issues related to the most recent global developments, sharing at the same time his experience in turkey. the global financial crisis hit all the advanced economies severely. it certainly affected the emerging economies of south - east europe, our two countries are part of. the contraction of global economic growth, the decline in foreign trade, the higher risk premiums, the interrupted functioning of the credit system and the rush to get liquidity affected our economies as well. these economies remain closely related to the euro area economy through a number of trade and financial channels. the response of fiscal and monetary policies to this crisis is of prime importance ; this aspect will be thoroughly elaborated by our dear friend. however, i would like to briefly address an aspect of macroeconomic and institutional framework, which has been an important determinant of the extent and magnitude of the national authorities ’ response to the crises : the exchange rate regime. a quick glance at the current developments in the region and broader allows us to draw the conclusion that the countries adopting a fixed exchange rate regime have been affected by the global crisis proportionally higher. moreover, they have been more constrained in terms of responding to the crisis. by contrast, countries adopting a free floating exchange rate regime have been affected by the crisis more mildly and smoothly, and they have preserved higher independence in their economic policies for the mitigation of crisis effects. obviously, this is not occasional : the free floating exchange rate regime is an important political, economic and institutional investment of emerging countries. their sacrifices in terms of building reliable monetary and fiscal policies, enhancing public confidence in the respective currencies and national financial institutions are rewarded with the flexibility this regime provides to macroeconomic policies in coping with the crises. exchange rate volatility mechanism is precisely a mechanism that allows the economy to absorb various shocks. the free floating exchange rate regime, devoted