First of all, I would like to congratulate our hosts on the tenth anniversary of a very successful central bank. I am certain that if anyone during the labour pains at Dayton had been asked to describe a monetary framework for BiH for the ten years ahead, not even the biggest optimists would have dared to predict such a successful position for the CBBH. Stable inflation and increasing gross international reserves indicate the stability of the currency board and its growing credibility. So, congratulations to all the governors and their teams on this achievement.
Second, I am really honoured to be on this session. I hope I will be up to the challenge. If nothing else, I will do my best to stay within the time slot allocated to me. Therefore, I will go straight to the subject.
Third, the topic of this session is quite challenging. Its title:”Monetary Stability in the Function of Financial Stability” implies, if understood literally, the role of monetary policy (as an independent variable) in the stability of the financial system (as a dependent variable). This is challenging, especially in the framework of the CBBH and its currency board. So I decided to focus on the region, the B10 countries. The combinations of letters and numbers are quite fancy in the world of finance. The B10 is simply an acronym for ten Balkan countries, with Balkan being meant as a geographical term, not a socio-political adjective with the usual negative connotations attached to it, we are often concerned about in the region. Furthermore, Kosovo is not an independent country (UN Security Council Resolution 1244), but it has a monetary authority independent of Serbia, hence its separate treatment in the note. I will first focus on monetary stability, then on financial stability, and I will end up with some recommendations (advice is cheap) to the B10 central banks regarding maintaining financial stability in the context of rapid globalization, huge net capital inflows, financial innovations and shocks spreading almost instantly from one epicentre throughout the world.
Fourth, we should keep in mind that the financial system is very important for any economy. “The financial system is a coordinating mechanism that allocates capital to productive investment opportunities. If capital goes to the wrong uses or does not flow at all, the economy will operate inefficiently and economic growth will be very low.” (Mishkin, 2006, p. 1). Accordingly, there will be more focus on the financial system than on the monetary system…Share Back to articles and speeches