Monetary Programming in Albania

Abstract

The development of every country is supported in formulation and implementation of macroeconomic program. Policies are formulated to correct disequilibrium between aggregate supply and demand, misbalances shown in the balance of payments, price increase and low increase of national product. An important part of this process is monetary programming as a main duty for the Bank of Albania. The object of this article is to prove the indicator that can be easily monitored to follow up the operational actions of the Bank of Albania aiming the achievement of main objective. On the economic analysis presented on this article we explain if the monetary aggregates could be used as operational objectives. Friedman (1998) suggests that timing and relations with main objectives are key elements for monetary aggregates. McCallum (1999) that the identification of monetary aggregates is added value on the framework of monetary policy formulation. Econometric analysis consists on the models realized to explain and test the relations of the monetary aggregates with macroeconomic indicators. Models are drafted based on three hypothesis. Other objectives of this study are related to brief analyses on the monetary policies compiled and realized from the Bank of Albania. Also through regression analysis we will show the relations of monetary aggregates and their impact on macroeconomic indicators, such as Gross Domestic Product and Consumer Prices Index.