TIRANA, Aug. 21 – The Bank of Albania has produced a book that exposes the discussion papers that were presented in the Round Table 2 “Inflation Targeting” which took place in December 7-8, 2006 in Tirana and follows from the conclusions of the Open Forum “Preconditions for Inflation Targeting in Albania” of the year before. The main purpose of this event is to openly discuss important issues that the Bank of Albania has to deal with before launching a new monetary policy strategy. The discussions focus on matters of statistics, inflation forecast, macroeconomic model of the country, improvements in the monetary policy report, communication of policies, relationship with the government and legal aspects. Some of the questions which are addressed in these discussion papers relate to issues deemed relevant for an effective and efficient conduct of monetary policy in Albania, despite the strategy chosen.
After a year of intensive work, we are presenting a second set of discussions and ideas on how to design the optimal path for an efficient monetary policy in Albania. The first one was delivered in 2006 summarizing the proceedings of Open Forum “Inflation Targeting”, which took place in December 2005 in Tirana.
Two years ago, we started thinking and working on what seemed to be just a vague objective at the time. The whole thing started with a small group of people trying to underline the main features of IT, and evaluating how our economy fits within a genuine IT framework. Here, we are witnessing the expansion of this group including more people in the process.
These are experts who represent different departments, different backgrounds and innovative views, marking a positive outcome of the progress made in the past two years.
With the growing number of experts, technical and scientific work has marked a significant progress. We certainly have not come up with rocket science, but we believe we are moving on the right track, which gives us confidence for the future. We are confident, because we have laid solid technical grounds for the success of the new regime. However, our confidence does not stem solely out of this. During the last year, the future of monetary policy regime has been at the center of our daily discussions. Our staff, along with local actors, have increased their awareness over the possible changes in the monetary policy. So far, the idea has not been challenged or questioned, although silence is not always gold. The matter has spread beyond borders as it is heavily discussed with our international friends in all occasions.
This book is a living proof of this fruitful communication. The work done during 2006 and summarized in the following discussion papers was driven mainly by the recommendations from the Open Forum in December 2005. That event was our first serious public attempt to discuss issues of Inflation Targeting.
Being the first attempt, perhaps it did not manage to go deeply into the characteristics of the Albanian environment. However, it marked an important step forward and it was a driving factor for the development of monetary policy in our institution. The Forum did manage to come up with important conclusions and recommendations, which set the ground for the future work.
Now, a year later, we can publicly announce that some of those recommendations are already fulfilled. To mention a few, since January this year, our inflation objective has changed from an interval 2-4 per cent year on year, to a point target of 3.0 per cent with a tolerance zone +/- 1.0 per cent. In order to improve the monetary policy decision making process, the Committee for Implementation of Monetary Policy has been established. It is composed of a small group of senior experts of the bank whose main job is to look into the monetary policy stance and implementation, and to advise the Supervisory Council accordingly. Along this process we have increased our understanding of legal implications of IT. We have identified the legal obstacles and have addressed them properly within the existing legal framework.
The rest of the recommendations have become part of the working agenda for the next years. This agenda has augmented after the conclusion of this Round Table. The next pages will offer readings on eight important topics that represent the areas where we concentrated our efforts in the last two years with respect to making monetary policy more effective and strengthening institutional independence of the Bank of Albania. These topics focus on matters of building a macro-econometric model for the Albanian economy and inflation forecasting models to aid the policy makers and build a communication strategy suitable for clearly conveying their decisions. Further, they deal with improving the information database in order to enhance the decision-making process and to develop an understanding and robust monetary policy report. The last topics deal with the institutional aspects of Bank of Albania, investigating its relationships with the Ministry of Finance and other agencies, both from a practical and legal view. Indeed, the last discussion paper provides a comprehensive view of Bank of Albania’s standing from a legal perspective and identifies challenges for further advancement.
We like to call these discussion papers since there is a lot that we can share and talk about. Our work is not finished, but ongoing, and your feedback and exchange of views is helpful to further improve our products.
