are presumed to be desirable and based on fundamentals. but short - term flows are by no means all undesirable and destabilizing. and there is no way of discriminating between useful flows and destabilizing speculative ones. for example, because foreign trade and investment inflows and outflows are not always fully offsetting, short - term capital flows are typically needed to balance out a country ’ s external accounts. these capital flows occur in response to actual and anticipated movements in the exchange rate, and thus serve to smooth out exchange rate fluctuations. because such flows are often driven by small differences in perceived rates of return at home and abroad, they could well be discouraged by a transactions tax. on the other hand, speculative flows that actually “ bet ” on a sharp movement in a currency, have rather large expected returns and are unlikely to be discouraged by the tax. in the end, a transactions tax would likely increase, rather than decrease, exchange rate volatility, as well as reduce market liquidity and raise the cost of capital. needless to say, where financial market fluctuations reflect changes in domestic macroeconomic policies that put investors at greater risk than before, the tax would be aimed at treating the symptoms rather than the cause of the problem. in all, i find the case for a tax on currency transactions completely unconvincing. promoting greater financial market stability if a tax is not a good idea, how else can we promote greater stability in international financial markets and reduce potential disruptions to domestic policymaking? i have already talked about the value of a flexible exchange rate system in facilitating adjustment to “ real ” shocks and allowing national authorities to pursue an independent monetary policy. flexible exchange rates can also be helpful in moderating the size of, and aiding in the adjustment to, capital flows. in addition, governments are increasingly coming to the realization that the issue of international financial stability is best addressed not by retreating into isolation or by falling back on distorting, costly restrictions, but rather through sound and transparent domestic economic policies. international co - operation can also help. it can help by encouraging countries to pursue national policies that lead to economic stability, thereby reducing the risk of sudden changes in market sentiment and sharp exchange rate fluctuations. and it can help by setting widely accepted standards for transparency and disclosure. such standards should support more informed market judgments about the riskiness of investments, especially in emerging market economies, and thus help avoid the crises that can be triggered

##increasing importance in the assets structure of the banking system, constituting a considerable source of the demand for monetary assets. the credit / deposit ratio increases on a continuous basis, an indication that positively introduces the function of the intermediation role of the banking system in supporting the economic development. the balance credit rise marked during the eleven - month period of the year the value of lek 15. 3 billion, reflecting a rise of 30 percent relative to the yearend of 2003. the easing monetary policy of the bank of albania has helped smooth the appreciation pressure of the lek exchange rate. the differences between interest rates in foreign currency and those in domestic currency incurred a decline during 2004. however, the rising foreign currency inflows on one hand, and the reduction of imports volume on the other one, have created a temporary difference between the foreign currency supply and demand during the summer period. this misbalance has exerted a significant pressure on the appreciation of the lek exchange rate, fostering the foreign market volatility. the exchange rate volatility through this temporary rise of foreign currency supply has imposed the necessity of the bank of albania intermediation to the foreign market during the summer period, towards purchasing the foreign currency. though trade deficit increased, the current deficit in the third quarter has been lower than in the previous quarters, thanks to increased and positive balances of income, services, and particularly current transfers. the current transfers balance is estimated at usd 295 million, being higher than the 1 / 2 one of the first two quarters, and nearly 44 percent higher than the one of the third quarter of the previous year. overall, the balance of payments performance during 2004 was positive. the gross foreign reserve level, at the end of this period, was estimated at usd 1 billion and 244 million, adequate to cover 5. 1 months of imports of goods and services. based on the aforementioned developments, we may conclude that year 2004 contributed generally in further consolidating the country's macroeconomic equilibrium. although full data for the yearend of 2004 are not yet available, there is a crystallization of the idea that the primary targets projected in the medium - term plan on the country's development have been met satisfactorily. according to the latest estimations, the albanian economy grew by 6 percent under the conditions of a low inflation rate, far closer to the bottom level of the targeted band. the structural reforms, through their problematic concerns, have progressed during