Examination of Major Factors Affecting Exchange Rate in Albania and its In?uence on In?ation and Real Economy (Period 2004 - 2014)

• Author: Blerta Haliti Baruti
• Position: University American College Skopje, Macedonia
• Pages: 28-37

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9

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cademic Journal o

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Business,

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dministration, Law and Social Science

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PCCL Publishin

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, Graz-

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ustri

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SSN 2410-391

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cces online at www.ii

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Examination of Ma

j

or Factors A ecting Exchange Rate in Albania and its

Inf‌l uence on Inf‌l ation and Real Econom

y

(Perio

d

2004 - 2014

)

P

h

D

(

C.

)

B

l

erta Ha

l

iti Barut

i

U

niversity

A

merican College Skopje, Macedonia

Ab

str

a

c

t

The aim of this research is to provide statistical evidence of major determinants of Euro/

A

lbanian Lek exchange rate levels and its consequences on inf‌l ation and real economy.

The method used

f

or this purposes is empirical research, Granger Causality Test has been

applied in order to provide answers to the objectives o

f

the research. Statistical examination

provided major evidence of Granger Causality of inf‌l ation, foreign direct investments,

i

ndustrial production, and foreign debt on Euro/ALL exchange rate levels. In addition the

research providesstatistical evidence that Euro/ALL exchange rate f‌l uctuations in long run

cause Savings in Domestic Currency and in short run Savings in Foreign Currency. Moreover,

t

here is also found the existence of Granger Causality between export and interest rates with

a minimum four months delay and Granger Causality of interest rates on inf‌l ation with two

months delay. Whereas, based on examined variables there could not be found any signif‌i cant

f‌i nding of long run inf‌l uence of Euro

/

ALL exchange rate levels on inf‌l ation and real economy.

Ke

y

words

:

Euro/Albanian Lek Exchange Rate, Inf‌l ation, Real Economy, Granger Causality,

V

e

ct

o

r

E

rr

o

r C

o

rr

e

l

a

t

io

n M

o

d

e

l

.

I

ntr

oduc

t

io

n

U

n

d

erstan

d

ing macro aggregates an

d

t

h

eir im

pl

ications wit

h

in one econom

y

is

extremel

y

decisive in addressing economic issues as whole, including micro se ing.

A

lthough, macro and micro o

p

erate at di



erent level o

f

abstraction, are basicall

y

interrelated, with macro aggregates de

p

end on micro behaviour and micro behaviour

is a



ected b

y

macro outcomes (Schiller, 2008).

I

n this direction, maintaining

sustainable macroeconomic environment is one o

f

the

p

re-determinants o

f

economic

growth, which along with the aim o

f

increasing living

q

ualit

y

standards within a

countr

y

are and must be

f

undamental targets

f

or sensible governments around the

world. Man

y

academic researchers

p

oint out that countries that are more eager in

maintaining constant macro varia

bl

es, ten

d

to

d

is

pl

a

y

h

ig

h

er

l

ong-term growt

h

r

ates. There

f

ore, essential

p

recondition

f

or countries to maintain relativel

y

stable

macroeconomic environment is to

p

reserve on considered necessar

y

levels macro

variables such as: in

f‌l

ation, interest rates, exchange rates, unem

p

lo

y

ment, the balance

o

f

p

a

y

ments, and some other s

p

eci

f‌i

c macro aggregates that are reliant on econom

y

structure o

f

a

p

articular countr

y.

O

n the other hand, the

p

rocess o

f

globalization and high intensit

y

o

f

international

trade, has cultivated a d

y

namic and com

p

lex environment, enhancing challenges

f

or

p

o

l

ic

y

ma

k

ers.

I

n t

h

is sense, es

p

ecia

lly

in suc

h

environment, un

d

erstan

d

ing re

l

ations