Remittances, Real Exchange Rate Appreciation and Monetary Policy in the Republic of Moldova

1. Remittances, Real Exchange Rate Appreciation and Monetary Policyin the Republic of Moldova Yerevan, Armenia 24 June 2010

2. Factors Underlying Compilation Methodology • Counterpart statistics on remittances to Republic of Moldova not applicable • No threshold on reporting data through the ITRS • Accurate reporting of data by banks • Other available data sources (specialized surveys)

3. ABROAD MOLDOVA Real estate, cars markets E Remittances adjustments D (1) Money transfers Consumption In FX MTOs agents/ subagents. Households FX cash withdrawal B Consumption in national currency Electronic transfers Commercial banks (act as MTOs agents) A Bank transfers Banks Net export of FX cash C Increase in FX deposits Net buying of FX cash FX cash Exchange offices (2) FX cash transmission National currency equivalent Cash carried by migrant during home visits Cash transferred by train conductors, bus drivers, etc. National Bank of Moldova: Remittances Estimation Model

4. Remittances in the context of BOP Source: National Bank of Moldova, Balance of payments

5. Currency composition of the money transfers by natural persons Source: National Bank of Moldova

6. Main currenciesnominal exchange rate evolution Source: National Bank of Moldova

7. Main currenciesnominal exchange rate evolution (2) Source: National Bank of Moldova

8. Remittances vs. Quarterly Average Exchange Rate Source: National Bank of Moldova, Balance of payments

9. Gross remittances and trade deficit Source: National Bank of Moldova, Balance of payments

10. Remittances vis-à-vis other inflows Source: National Bank of Moldova, Balance of payments

11. Conclusions • Migration and remittances are country specific issues, depend on many factors such as geographical location, legal regulation of cross-border movement in host countries, language barriers, education level of migrants, etc. That is why countries should take into consideration their own specifics while elaborating estimation methods. • As the factors that influenced migration and remittances are changeable the methods of their estimation can not be permanent. They need periodical revisions. • Even if the data sources used for estimations seem to be reliable, use of additional data sources for the validation of assumptions is necessary

12. Monetary Policy for 2010 NBM monetary policy strategy has a medium-term focus, to achieve and maintain price stability. Monetary policy for 2010, main objective: • inflation objective* - 5.0 percent (± 1.0 percentage points) As compared to: • 9.0 percent by the end of the year – for 2009 • 10.0 percent by the end of the year – for 2008 *measured by the consumer price index published monthly by the National Bureau of Statistics (NBS)

13. Monetary Policy instruments • Main monetary policy instrument: • open market operations • Auxiliary instruments • standing facilities, • required reserves ratio and • foreign exchange market interventions

14. Thank You for Attention!