Governor Yaron

Distinguished audience,

On behalf of the Board of the National Bank of Romania, I am honoured to address to all of you the warmest welcome to this conference.

Over the years, National Bank of Romania organised similar conferences and we stand as keen exponent supporters of the economic academia and of science and research, in general. These events enjoyed the attendance of distinguished professors from prestigious international universities, globally recognized for their results and contribution in Economics and, in particular, in the financial domain and banking sector.

On that note, today, I am honoured to present my heart-felt salute to the distinguished professor Amir Yaron, the Governor of the Bank of Israel, while commending highly on his endeavours, interests and research in the field of Economics and financial markets.

I take the opportunity to praise his remarkable achievements in academic research, of global recognition. Without any further ado, the brief biography of Governor Yaron stands testimony to his work.

From his role as professor of Banking Finance, at the Wharton School, University of Pennsylvania, Amir Yaron was subsequently appointed as Governor of the Bank of Israel in October 2018.

Professor and Governor Yaron holds various roles and functions, as president of the Foundation for Advancement of Research in Financial Economics. He is co-editor of the Review of Asset Pricing Studies, associate editor of Quantitative Economics and Financial Research Letters, member of the Advisory Board of the Journal of Monetary Economics Carnegie-Rochester-NYU Conference Series on Public Policy, as well as research associate at the National Bureau of Economic Research in the ”Asset Pricing” group and, also, co-leader of the ”Capital Markets and Economics” group.

Professor Yaron's research is published in globally prestigious journals, among which I mention the Journal of Political Economy, the Review of Financial Studies, the American Economic Review and the Journal of Finance, and his research has been awarded with renowned distinctions in academia.

His expertise and teaching career in the field of economics, capital markets, finance and banking have recommended him as visiting scholar to the Federal Reserve Bank of Philadelphia, the Bank of Israel, the IMF and in Europe, from Spain, Sweden and now, distinguished keynote speaker at the National Bank of Romania.

Ladies and gentlemen,

Following these praising words to the work of Governor Yaron, we are looking with utmost interest to his views on several aspects in the mandates of Central Banks in the current circumstances.

Before giving the floor to Governor Yaron, I would like to briefly share some thoughts and views on some specific economic issues and key aspects, in the current challenging context, marked by heightened volatility in an uncertain environment, adverse geopolitical stances, climate change impact on economies and the transformative forces shaping our society.

To my view, first and foremost, economies, Romania’s included, seek to ensure the robustness of economic growth, and the sustainability of it in the long-run. The recent episode of high inflation rate determined the central banks to respond with a tightening cycle of monetary policy, after a prolonged period of low and even negative interest rates prior to 2020. When confronted with inflation, the public expects higher wages and central banks seek to manage the inflationary expectations, to avoid the onset of a wage-price spiral in the economy. Despite the recent progress in disinflation, we still maintain our prudent views that, to steer inflation towards the targeted range in the projection horizon, diligent judgment and a holistic approach to assess the general macroeconomic picture is essential, besides the strong data fundamentals to support monetary policy decisions .

On the other side, fiscal policies aim for consolidation, however looser-for longer stances reflected growing imbalances in the fiscal and external positions, while exogenous shocks to the monetary policies, such as geopolitical unrest, global energy prices shocks and climatic events amplified the imbalances. In such context, the policies interplay between monetary and fiscal reflects higher sensitivities and require a prudent approach, also taking into account the independence of monetary policy and the mandates of the central banks.

Economic transformation is related also to green and digitally-driven growth. Innovation and new technologies require long term sustainable investments and the banking sector is contributing to this transition process, while central banks are overseeing the soundness of banking practices. To ensure the independence of their function and policy, central banks should respond to these challenges within their remit while answering new questions about how central banks might contribute to climate change risks mitigation and adaptation, supporting the general resilience of the economies.

Climate risks affect prices in the economy and the macro-financial stability, yet they still need to be accounted for in the legal mandate of the central banks. At the same time, without prejudice to their statutory legal objectives, central banks support the general government policies, climate actions included. Central banks have a keen look to abide by the neutrality principle of their decisions to the economy.

Regarding the digitalisation in the banking sector, banks intensified their investments in technology centers and operational efficiency, while taking actions to increase the cyber-security resilience, and active measures against cyber-terrorism. At the same time, central banks seek to strengthen the regulatory area and supervisory assessment of the banking system, in an accountable manner to the public.

In continuation of the digital transformation, I would like to focus my words on an emergent border-domain in finance, that refers to crypto-assets and new financial technologies. As in many of my previous speeches, I remind that we do not see crypto-assets as money, not even in the broadest sense possible. These are highly volatile alternative investment products, by contrast to money which are liquid, safe and accesible. There are a lot of differences between crypto-assets and Central Bank’s digital currency and for a better understanding, financial education is essential, to bring forth these concepts into public awareness.

Another dimension also emerges in the banking field – yet in a very incipient phase – the Artificial Intelligence and its potential role in the public as well as the private financial sectors. But I will stop here.

Concluding my introduction, I kindly address the warm invitation to our keynote speaker, Governor Amir Yaron, to take the floor and share his insights on the most pressing challenges for central banks in the current circumstances.

Thank you for your attention.