Monetary policies and banking development in Albania during 2020 and onwards

• Pages: 79-88

Vo

l. 7 N

o

. 1

M

arch, 202

1

ISS

N 2410-391

8

A

cces on

l

ine at www.ii

p

cc

l

.or

g

7

9

A

cademic Journal o

f

Business,

A

dministration, Law and Social Sciences

II

PCCL Publishin

g

, Graz-

A

ustria

M

onetar

y

policies and banking development in Albania during 2020 and

o

nw

a

rd

s

P

h

D Kristaq G

j

y

l

i

F

aculty o

f

Law,

U

niversity o

f

Tirana

Ab

str

a

ct

T

he Bank of

A

lbania has as its primary objective the achievement and maintenance of price

s

tability. To achieve this target, it

f

ollows the in

f‌l

ation targeting regime with a medium-term

target of 3% . 1 This point value is considered as the annual inf‌l ation rate which supports

the healthy growth o

f

the economy. Monetary policy is implemented through open market

operations, through repurchase agreements and reverse ones with a one-week term. The Bank

o

f

A

lbania de

f‌i

nes a

f

ree exchange rate regime, in which the value o

f

the domestic currency

against the foreign ones is determined by the movements of supply and demand in the foreign

exchange markets. The Bank reserves the right to intervene in this market to manage the level

of its foreign exchange reserve, through publicly announced auctions. The monetary policy

framework and the exchange rate regime are considered appropriate and benef‌i cial to achieve

the central bank target and are not expected to change in the medium term. The instruments

u

sed are in constant calibration to increase the ef‌f ectiveness of the transmission of monetary

p

olicy in the market.

Ke

y

words

:

Monetary policies, banking, development,

A

lbania

.

I

ntr

odu

ct

io

n

T

he Bank o

f

A

lbania has increased its monetar

y

stimulus during 2020, in the

f

ace

of

the

p

andemic crisis. The measures aimed at kee

p

ing borrowing costs low and

su

pp

orting credit

f‌l

ows b

y

ensuring the normal

f

unctioning o

f

f‌i

nancial markets.

Th

e

k

e

y

interest rate was re

d

uce

d

by

50

b

asis

p

oints,

b

ringing it to 0.50% , 2 w

h

ic

h

i

s its

h

istorica

l

l

ow. T

h

e Ban

k

p

rovi

d

e

d

un

l

imite

d

l

i

q

ui

d

it

y

to t

h

e

b

an

k

ing s

y

stem.

T

he transmission o

f

monetar

y

stimulus to the econom

y

has been good. Borrowing

i

nterest rates are low and credit to the econom

y

, aided b

y

sovereign guarantee

schemes, has continued to meet the

f‌i

nancing needs o

f

households and businesses.

A

lso, the increased monetar

y

stimulus, together with the signal

f

or the

f

uture, have

reduced the uncertainties in the

f‌i

nancial markets and in the economic agents in the

f

uture.

I

n addition to monetar

y

measures, the Bank o

f

A

lbania's res

p

onse

p

ackage

to the Covid-19 crisis includes other micro and macro

p

rudential measures, which

toget

h

er wit

h

government assistance

p

ac

k

ages,

h

ave mitigate

d

t

h

e negative im

p

act

of

shocks in the

f‌i

nancial s

y

stem and the econom

y

, creating

p

remises

f

or the revival

of

economic activit

y.

The Bank of Albania projections expect the contraction of economic activity during

p

 

1

I

nf‌l ation rate set b

y

the

E

uro

p

ean

U

nion

.

 

2

The annual re

p

ort 2020 on Political Monetar

y

Police”, Published b

y

Central Bank of

A

lbania, Janu-

a

r

y

2021. www. bankofalbania.org.