Their validity in ensuring the convergence of transition economies is an issue that is hotly contested by several economists (see Buiter et al., 2002). 3  See Buiter and Grafe (2002) and Begg et al. (2002). 2  BIS Review 1/2007  (IV)  The Bank of Albania approach to EU accession  The monetary policy of the Bank of Albania focuses on maintaining price stability through the control of monetary aggregates which are used as intermediate target. Indirect instruments are used to transmit interest rate and liquidity signals to the market. Repo rate is the leading indicator for short term interest rates while repo and reverse-repo operations are used to manage liquidity. Over the last five years the Bank of Albania stability oriented monetary policy has generated low and stable inflation; it has also ensured that medium and long run inflation expectations have been well contained. The economic growth has been robust at around 5-6 percent of GDP, while enjoying a high degree of financial stability. (In other words, it seems like we are already close to the ERM II standards.) Such results reflect the opinion that economic convergence should not be held back by the political one. Political processes dictate that ERM II and EMU should be preceded by entry into the EU. The Bank of Albania has a clear view of the EU accession process. The design of the current and future monetary policy strategies is in line with the ultimate objective of EU accession.
The best environment that the central bank can provide for the economy to attain a high level of output and steady growth is one with price stability. Under inflation targeting, the Monetary Policy Board has to look ahead 18-24 months and adjust its stance today to influence the outcome of the future. This will help minimize the boom and bust phenomenon. The floating exchange rate regime will also help prevent imbalances from building up excessively, hence minimizing the risk of major crises. In terms of transparency and accountability, inflation targeting is probably the best tool of communication. While the general public may have difficulty understanding and keeping track of monetary growth targets, it fully understands inflation, the index of which is calculated and announced by an independent agency, in the case of Thailand the Ministry of Commerce. The regular publication of inflation reports will also help inform and educate the public much better than in the past. In the case of Thailand, inflation targeting is the best tool to ensure high output, sustainable growth, export competitiveness, prevention of a worsening of income distribution and a transparent and accountable central bank. The Bank of Thailand last year announced our explicit intention to control inflation, and the range of 0 to 3.5% of core inflation was announced in 23 May 2000. Since the beginning of the year, we have seen the yield on 10-year bonds drop from 7.91% per annum to 6.1%.