1999
DOI: 10.1080/14631379996075
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Inflation and Stabilisation in Albania

Abstract: This article analyses the determinants of inflation in Albania during the transition period. We attempt to explain why Albania was successful in reducing inflation, by the end of 1995, to a level comparable to many countries in the European Union. We discuss the relative importance of monetary, fiscal and external variables, and we highlight the role of remittances by emigrants. Using vector autoregression analysis, we demonstrate how shocks to money growth and remittances affect the subsequent paths of inflat… Show more

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Cited by 18 publications
(11 citation statements)
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“…The relationship between money growth and currency depreciation is not surprising given the CNB has followed since January 1994 (though unannounced) an exchange rate band wide enough to pursue discretionary monetary policy to offset any adverse movements in the exchange rate triggered by capital flows (Sonje, 1999). Moreover, the significance and importance of the nominal exchange rate as a factor in the inflationary process parallels the findings of Kutan and Brada (1999) in the cases of the Czech Republic, Hungary, and Poland, Haderi, et. al.…”
Section: Discussionsupporting
confidence: 61%
“…The relationship between money growth and currency depreciation is not surprising given the CNB has followed since January 1994 (though unannounced) an exchange rate band wide enough to pursue discretionary monetary policy to offset any adverse movements in the exchange rate triggered by capital flows (Sonje, 1999). Moreover, the significance and importance of the nominal exchange rate as a factor in the inflationary process parallels the findings of Kutan and Brada (1999) in the cases of the Czech Republic, Hungary, and Poland, Haderi, et. al.…”
Section: Discussionsupporting
confidence: 61%
“…In the case of Albania, present analyses of previous policies still tend to disregard such adverse effects of earlier reforms. Financial fragility is not sufficiently captured by noting, without further specification, that "political stability and control of the informal financial sector are also crucial" or that "now is an opportunity to renew the momentum for reforms" (Hashi and Xhillari, 1999, p 100;Haderi et al, 1999). Typically, McNeilly and Schiesser-Gachnang (1998), investigating the 1992 inflation reduction policy in Albania, ascribe its success to trade liberalisation, extensive external assistance, tight fiscal policy, increased savings, and hard budget constraints -but fail to note the perverse effects on financial markets developments that these very policy instruments and their responses can have, and clearly had in Albania.…”
Section: Summary Discussion and Conclusionmentioning
confidence: 99%
“…38 Indeed, the role of emigre remittances in assisting the reduction of inflation in Albania has been regarded as unique amongst European post-communist societies. 39 The Albanian government has sought strategic investors for the large state-owned enterprises that have remained in operation, but has experienced painfully slow progress in achieving only limited success. Most notably, in 1997 an Italian-British consortium signed a joint venture to rehabilitate the country's chrome mines with an initial investment of $41m, and Canadian investment of $4m was earmarked for upgrading copper production and processing.…”
Section: A Role In the Global Market Place?mentioning
confidence: 99%