and expanding businesses may require time to put the necessary capital equipment in place to increase productivity. and of course, some firms will go out of business and some people will be unemployed for a period of time. but from a macroeconomic point of view, adjustment can take place with less social and economic cost overall when inflation expectations are well anchored, the economy is operating close to its potential, and a floating exchange rate is helping to absorb external shocks. international adjustments that ’ s a quick look at how the canadian economy is adjusting to global forces. our flexible exchange rate is helping to bring about movements in the real exchange rate, which is what matters in terms of the adjustment process. but this is not the case in all countries. where the nominal exchange rate is fixed, the only way to bring about adjustments in the real exchange rate is through large movements in relative wages and prices. this is theoretically possible if wages and prices are highly flexible, both upwards and downwards. but in practice, wages and prices aren ’ t that flexible. and so when exchange rates are fixed, adjustment can still take place, but it comes at a high cost - through shrinking output and rising unemployment in countries with current account deficits, and eventually through very high inflation in countries with current account surpluses. while this adjustment is costly, it does work, provided countries that are fixing their currencies through foreign exchange intervention are not offsetting the monetary consequences of this by “ sterilizing ” the intervention. this is an important point. when intervention is sterilized, this temporarily prevents the movements in wages and prices needed to bring about the necessary economic adjustment. in these cases, economic adjustment is postponed - in both surplus and deficit countries. but the adjustment and its costs are only delayed, they are not avoided. indeed, the costs typically end up being larger than they would otherwise be, precisely because they have been delayed. the only way to truly minimize the costs of adjustment is to allow nominal exchange rates to move around. for decades, canada has benefited from having a flexible exchange rate that can help bring about economic adjustments. by the end of the 1990s, most industrialized economies and a number of emerging - market economies had also realized the benefits of having a floating currency. but other economies, particularly but not exclusively here in asia, have opted for a fixed exchange rate regime. and unfortunately, some have rejected the adjustment mechanisms that should go along with such a regime. by sterilizing their interventions, they are accum

research in these and other innovative areas, like green finance, will develop further and become traditional topics in central banks ’ research agenda. for this reason, i challenge our researchers to consider these trends in their future research agenda. continuous enhancement of research topics and methodologies is a must for a central bank. in this respect, i would like to thank ambassador maitre, the swiss government, the state secretariat for economic affairs ( seco ) and its bilateral assistance and capacity building for central banks ( bcc ) program for supporting research activity at the bank of albania. this 1 / 2 bis central bankers'speeches cooperation has been a significant instrument for improving our research work and exposing it to academic and international research community. our cooperation will continue in the future to improve research methodologies and products. we are currently working with seco toward the optimization and institutionalization of research agenda and research implementation in central banks. these important issues will be discussed in a jointly - organized workshop with all bcc partners on capacity building for central banks, in tirana in spring 2020. dear ladies and gentlemen, our see research workshop has become a cherished tradition for bank of albania and central banks of the see region. it is a great pleasure, and we are very happy to see that the workshop continues to generate interest beyond the see region and central banking community. the list of participants has expanded to include speakers from academic institutions in the eu, the us and south - eastern asia, as well as from international financial institutions. your participation is contributing to broadening and enriching our network and we hope that discussions will help our researchers to improve their work and strengthen their research recommendations. these days, your participation in the workshop takes another and even more significant meaning in the wake of the tragic consequences caused by the strong earthquake. it helps to show that, despite many losses, we are resilient and will continue to work to overcome the emotional and economic hardships of this tragic event, shed the desperation, fear and despair, and return to normal activity. i wish the workshop a great success, and all guests and participants a pleasant stay in tirana! 2 / 2 bis central bankers'speeches