Remittances, Remittances, Real Exchange Rate Appreciation Real Exchange Rate Appreciation

and Monetary Policyand Monetary Policyin the Republic of Moldova in the Republic of Moldova

Yerevan, Armenia24 June 2010

Factors Underlying Factors Underlying Compilation MethodologyCompilation MethodologyCounterpart 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)

National Bank of Moldova: National Bank of Moldova: Remittances Estimation ModelRemittances Estimation Model

ABROAD MOLDOVA

(1) Money transfers

(2) FX cash transmission

MTOs agents/

subagents. Electronic transfers

Banks

Bank transfersCommercial banks

(act as MTOs agents)

Remittancesadjustments

FX cash withdrawal Households

Consumption In FX

Real estate,cars markets

Consumption innational currency

Exchangeoffices

Cash carried by migrant during home visits

Cash transferred by train conductors, bus drivers, etc.

Increase in FX deposits

Net export of FX cash

FX cash

National currency equivalent

Net buyingof FX cash

A B

C

DE

Remittances in the context of BOPRemittances in the context of BOP

0

100

200

300

400

500

600

700

2006,Q1

2006,Q2

2006,Q3

2006,Q4

2007,Q1

2007,Q2

2007,Q3

2007,Q4

2008,Q1

2008,Q2

2008,Q3

2008,Q4

2009,Q1

2009,Q2

2009,Q3

2009,Q4

$US

mill

ions

Compensation of employees Workers' remittances Other current transfers Money transfers via MTO Money transfers via Banks

Source: National Bank of Moldova, Balance of payments

Currency composition of the money Currency composition of the money transfers by natural personstransfers by natural persons

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2007, Q1 2007, Q2 2007, Q3 2007, Q4 2008, Q1 2008, Q2 2008, Q3 2008, Q4 2009, Q1 2009, Q2 2009, Q3 2009, Q4 2010, Q1

USD EUR RUBSource: National Bank of Moldova

Main currenciesMain currenciesnominal exchange rate evolutionnominal exchange rate evolution

9.00

10.00

11.00

12.00

13.00

14.00

15.00

16.00

17.00

18.00

USD EUR

0.25

0.30

0.35

0.40

0.45

0.50

01.07 04.07 07.07 10.07 01.08 04.08 07.08 10.08 01.09 04.09 07.09 10.09 01.10 04.10

RUB

Source: National Bank of Moldova

Main currenciesMain currenciesnominal exchange rate evolution (2)nominal exchange rate evolution (2)

Exchange rate evolution as compared to the situation at 01.01.2007

0.50

0.60

0.70

0.80

0.90

1.00

1.10

01.07 04.07 07.07 10.07 01.08 04.08 07.08 10.08 01.09 04.09 07.09 10.09 01.10 04.10

USD EUR RUB

Source: National Bank of Moldova

Remittances vs. Remittances vs. Quarterly Average Exchange RateQuarterly Average Exchange Rate

0

100

200

300

400

500

600

2006,Q1

2006,Q2

2006,Q3

2006,Q4

2007,Q1

2007,Q2

2007,Q3

2007,Q4

2008,Q1

2008,Q2

2008,Q3

2008,Q4

2009,Q1

2009,Q2

2009,Q3

2009,Q4

$US

mill

ions

2

3

4

5

6

7

8

9

10

11

12

13

14

Compensation of employees Workers' remittances MDL/USD Average Exchange Rate

Source: National Bank of Moldova, Balance of payments

Gross remittances Gross remittances and trade deficitand trade deficit

0

160

320

480

640

800

960

1120

1280

1440

1600

2006,Q1

2006,Q2

2006,Q3

2006,Q4

2007,Q1

2007,Q2

2007,Q3

2007,Q4

2008,Q1

2008,Q2

2008,Q3

2008,Q4

2009,Q1

2009,Q2

2009,Q3

2009,Q4

$US

mill

ions

0

10

20

30

40

50

60

70

80

90

100

%

Import of Goods and services Export of Goods and services Remittances / Trade deficit (right axis)

Source: National Bank of Moldova, Balance of payments

Remittances vis-à-vis other inflowsRemittances vis-à-vis other inflows

0

100

200

300

400

500

600

2006,Q1

2006,Q2

2006,Q3

2006,Q4

2007,Q1

2007,Q2

2007,Q3

2007,Q4

2008,Q1

2008,Q2

2008,Q3

2008,Q4

2009,Q1

2009,Q2

2009,Q3

2009,Q4

Foreign direct investment (net) External loans (drawings) Inflow of governmental transfers Remittances

Source: National Bank of Moldova, Balance of payments

ConclusionsConclusions 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

Monetary Policy for 2010Monetary Policy for 2010NBM 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)

Monetary Policy instrumentsMonetary Policy instrumentsMain monetary policy instrument:

open market operationsopen market operationsAuxiliary instruments

standing facilities, required reserves ratio and foreign exchange market interventions

Thank You for Attention!Thank You for Attention!