unemployment, a high rate will not ”. the operation of this principle had not previously been observable because inflation had never stayed high for long enough to be built into expectations. the second, and related, factor to be brought into the conventional model was the importance of supply shocks. these could be thought of as shocks which reduced the sustainable levels of output and employment consistent with steady inflation. for much of the world the quintessential supply shocks were rises in oil prices but, for australia, the real wages shock of 1974 was probably at least as important. recognition of the importance of supply shocks implied a corresponding recognition of the limitations on what could be achieved through conventional demand - management policies. although economic thinking has advanced in a number of ways since the 1970s, these two basic lessons from the period remain relevant, and often need repeating. while the economics profession was quick to take up the stable phillips curve, it was also quick in dropping it as a policy prescription. but there are still some in the policy debate - - particularly among politicians, lobbyists and journalists - - who think of the economy in terms of a stable phillips curve, and who would like us to choose a higher inflation rate on the assumption that this would produce a sustained lift in growth and employment. but that is not the choice we face. higher inflation can deliver at best only a temporary stimulus to growth and, in the longer run, is more likely to be detrimental. the move to monetary targeting in the light of the early 1970s experience, economists stopped assuming a stable phillips curve and started looking for ways to anchor monetary policy decisions. the friedman suggestion of a steady growth of the money supply sufficient to accommodate normal economic growth and low inflation found favour in a number of countries. several had been focusing on monetary aggregates since the early 1970s and, by 1975, a number, including the united states, germany, the united kingdom and switzerland were announcing monetary targets. australia followed suit in 1976 by beginning to announce forecasts for the growth of m3. these were subsequently announced each year in the federal budget until the practice was discontinued in 1985. the nature of the targets was somewhat different to what is often assumed in the textbooks or in the somewhat idealised notions of monetary theorists. in no country were targets adhered to with the sort of mechanical precision envisaged in friedman ’ s program for monetary stability, the classic statement of the case for monetary targeting. they were usually seen as guides to policy, and as vehicles for explaining the rational

has merely turned into a great confidence crisis. presently cooperation, coordination and a greater attention is required as concerns not only to the current problems but also to the prospects of the situation. we have been cautious. over last two years i have taken some initiatives for coordinating our operations in regional framework. two years ago we organized for the first time a conference on financial stability in albania, where seven governors of central banks of the region participated. besides the governors ’ club, we have actually a club that functions precisely for supervision, where we discuss about all banking supervision problems and make a coordination of laws and respective regulations. last year the new banking law entered into force, while the current year has been full of changes regarding four basic supervision regulations, having the main focus on increasing bank management quality, bank transparency, internal control and risk management. the financial crisis here in the united states of america started with a fictive house price rise. how do you evaluate this market in albania and how concerned are you about non - performing loans? i would like to repeat what i said a week ago, when the financial stability declaration was made public, i. e., the albanian banking system is not “ contaminated ” from “ toxic ” products of the american market and other markets. anyway, have foreign banks operating in albania invested in markets that may be contaminated? the albanian banking system is safe. the security of this system rests in its parameters of capital, liquidity and profit. the albanian banking system is profitable, and non - performing loans are within the specified international parameters. our supervision standard is another additional element of the protective network that the bank of albania creates. special attention the bank of albania has paid to the banking supervision, particularly over last two years. it is a great guarantee for the public in order to raise the confidence in these institutions. the increased confidence in these institutions is a cornerstone for a steady longterm progress of any world economy, especially under such situation. we have always preceded the situations, treating the financial stability problem with primary importance. i have announced in public more than one year ago that the financial stability and the macroeconomic policy walk hand in hand. i think every investment in financial system quality is an investment made for a better and more successful implementation of monetary policy. at your meeting with the imf, of course you have discussed for the perspective of prolonging the program of the imf with albania. is there achieved any preliminary result? what camp do you belong to, the camp protecting