this area almost entirely with the applicable framework in eu countries. since august 2012, we have ensured the relative stability of the exchange rate, which is one of the factors of overall stability. the international environment in the prior period was marked by uncertainty arising from the diverging monetary policies of leading central banks, but also from the so - called greek crisis, the asian stock market crisis, shifting outlooks for global and chinese growth, the effects of brexit, geopolitical tensions, etc. to these challenges we responded adequately, owing to greater resilience of the serbian economy and the financial system, cautious monetary policy, as well as interventions in the foreign exchange market which were timely, fine - tuned and well - balanced in terms of the reaction to short - term pressures towards both the depreciation and appreciation of the dinar. expressed in numbers, in the last five years until july, the nbs intervened in the foreign exchange market by net selling eur 765 million, with the nominal depreciation of the dinar against the euro of 1. 5 %. this is significantly less than the net sale of eur 5. 7 billion in the five years before that, when the nominal depreciation of the dinar was 33. 2 %. bracing for the coming pressures by preparing a defence system at peaceful times and investing in stability during turmoil, the country ’ s gross foreign exchange reserves were preserved at an adequate level, measured by all criteria, while in net terms, they increased from eur 6. 6 billion at end - 2012 to eur 8. 4 billion at end - 2016. chart 7 dinar exchange rate chart 8 level of foreign exchange reserves ( in eur bn ) ( eur / rsd ) ( in % ) nbs foreign exchange reserves, gross nbs foreign exchange reserves, net 10. 2 10. 9 10. 0 period 6. 8. 2012 until today * 8. 2 10. 6 10. 4 9. 9 11. 2 period 1. 1. 2008 - 6. 8. 2012 12. 1 6. 7 6. 6 7. 8 7. 7 8. 4 8. 4 - 5 5. 1 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 6 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 eur / rsd ( lhs ) source : nbs. exchange rate daily volatility (

which does not operate through resource use in the economy is the effect of monetary policy on inflation expectations and its impact on price - setting conduct and how price changes are received in the economy. there is scarcely any doubt that inflation expectations played an independent role prior to the inflation target achieving credibility in the mid - 1990s. now that the inflation target appears to be well known and generally accepted and inflation expectations are well in line with the inflation target, the role of expectations in the transmission mechanism is not so self - evident. however, stable and low inflation expectations should affect businesses'pricing and wage formation. if the players in the economy are confident that inflation really will be held at a low level, this could also lead to companies not considering that they have to change see kerstin hallsten, " bank loans and the transmission mechanism of monetary policy ", sveriges riksbank working paper series no. 73 - 1998. their prices so often, for instance, in the event of changes in costs that are perceived as temporary. if the expectations are not met, there is a risk that price changes will be large when they finally occur. stable inflation expectations can thus lead to inflation not varying continuously with the output gap which paradoxically can make the conduct of monetary policy more difficult. in recent years, it has been difficult to find clear and reasonable correlations between the demand situation and inflation for swedish data. the monetary policy decisions are based on forward - looking assessments of inflation and here the assessment of the relationship between the expected output gap and inflation is an important determining factor. a lower correlation could depend on inflation expectations having stabilised in recent years. individual companies can, for instance, hold back price increases even if resource use has increased, if they believe that their competitors are not intending to raise their prices. as long as inflation expectations are not affected, prices will not be changed. if the forward - looking inflation assessments that serve as the basis for monetary policy decisions, assume, for instance, that the correlation between growth and inflation will continue to be as low as has been observed, this can result in changes in the output gap not leading to any immediate monetary policy response. the risk is that inflation expectations will then accelerate and that inflation will increase. in the same way, prices may be slow to respond in the case of falling resource use. in other words - if monetary policy does not act as expected on fluctuations in resource use, the correlation between growth and inflation can again increase. presumably the relation between the