Inflation and Transmission Mechanism in Albania. New Empirical Evidence

AuthorIlira Pulaj
PositionDepartment of Economics, 'Ismail Qemali' University, Vlorë, Albania.
Pages231-239
231
Vol. 4 No.1
May, 2018
Balkan Journal of Interdisciplinary Research
IIPCCL Publishing, Graz-Austria
ISSN 2410-759X
Acces online at www.iipccl.org
InationandTransmissionMechanisminAlbaniaNewEmpiricalEvidence
Ilira Pulaj
Department of Economics, “Ismail Qemali” University
Vlorë, Albania
Abstract
Targetinginationisoneoftheregimesappliedinmanydevelopedordevelopingcountries
ItisalsoappliedtotheAlbanianeconomyunderaexibleexchangerateTheaverageannual
inationofthefourthquarterresultedmovingtoexpecteddirectionDespitekeeping
inationundercontrolpressuresandexternalthreatsareongoingTherecentnancialcrisis
hasalsohaditseectsontheeciencyof monetarypolicyon pricesThe aimofthis paper
is to make a qualitative and quantitative assessment of exchange rate as channel of monetary
transmission by providing evidence from Albanian experience by using Autoregressive VAR
model. As an open economy the exchange rate has been one of the most important contributing
atpricelevelbyexchangeratepassthrough
KeywordsInationmonetarytransmissionmechanismexchangerate
Indtroduction
Therecentdecadestheinationtargetingstrategyhasbeenwidelyused by both
developedanddevelopingcountrieswithnonconsolidatedcapitalmarketsForall
authorsitisanowledgedthatinationisamonetaryphenomenonthereforeinthe
long run, monetary policy can contribute to the economic development of the country
whilemaintainingalowandstableinationrateForthisreasonthemainobjective
of monetary policy is price stabilityThe development of ination in Albania has
been under the pressure of local and international macroeconomic developments in
whiitisnotedthattheannualinationratehasreaedstabilizedvaluesduetothe
generationoftoleranceoftheBank ofAlbaniaBokaTorluccioTheInation
TargetingRegimeisaforecastingprocedurethat analyzesthedependencebetween
theeconomic indicators step by step to thelevelof macrolinks and is a publicly
understandable meanism that leads to increased central bank responsibility
TheBank ofAlbania aimsat apositiveination ratetotake intoaccount the rapid
tenologicalevolutionofproductsandtheirqualityimprovement
TheexangeratemeanismwillbeexaminedinthethirdpartWiththeincreasing
internationalizationofeconomiesall overthe worldand exibleexange ratethe
importanceoftheexangeratehasincreasedThismeanismisthoughttobemore
importantin openeconomiesand increaseswiththe degreeofopenness Mishkin
meansthatinarelativelyclosedeconomyitseectshouldnotbeveryimportant
Hisdynamicshasangedandthenancialcrisishashadanimpact
Inationtargeting
Inationtargetingcanbedenedasaregime thatcontains aclear targetfor future

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