In other words, central banks have to be prepared to adjust policy when past asset price increases could be a significant factor putting upward pressure on aggregate demand, as well as when past declines threaten to reduce output relative to potential. Although the potential case for adjusting policy applies in both directions, the implications for policy may differ. Because some asset prices may fall more abruptly than they rise, and because the effects of downward moves in asset prices on demand may be larger due to the greater negative impact of deflation on the net worth of borrowers—witness the United States in the 1930s or Japan in the 1990s, the case for adjusting monetary policy in response to negative asset price shocks is commonly considered more compelling than in the alternative context. But this does not mean that monetary policy should generally ignore the effects of increases and only respond to observed declines in asset prices. The test should be the size and circumstances of the asset price moves and their impact on the forecast relative to the central banks’ objectives, not the direction of the asset price move. Different considerations apply in the circumstances where the central bank is considering how a potential future move in asset prices may affect the forecast. These circumstances call for even greater caution and care.
With limited exposure to international financial markets, Algeria has not been directly affected by the global financial turmoil. However, the sharp decline in oil prices over the second half of 2008 significantly impacted export and budget revenues. Despite this external shock, macroeconomic performance remained robust in 2009 with: –  strong external financial position with comfortable international reserves $ billion146, end September 2009 ) equivalent to 3 years imports of goods and services, and low external debt;  –  the real effective exchange rate around its equilibrium level;  –  continued high growth in the non-oil sector, expected to exceed 9% in 2009 against 6.1% in 2008;  –  sizeable savings in the stabilization fund despite the expected first budget deficit for several years;  –  contained inflation, notably on account of continued absorption by the Bank of Algeria of the excess liquidity. The strong economic performance in 2009, in line with the performance of the past several years, reflects continued prudent financial policies, sustained efforts to anchor monetary stability, and progress in strengthening the resilience of the banking sector, which have supported macroeconomic stability since 2000. 2. Savings and investment financing structure  Following a period of external financial imbalances and related adjustment programs during the nineties, Algeria has entered, since 2000, a period of sustained increase in savings, leading to a situation of excess savings over investment.