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Inflation and Stabilisation in Albania

Author

Listed:
  • Sulo Haderi
  • Harry Papapanagos
  • Peter Sanfey
  • Mirela Talka
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 inflation and the exchange rate. Our main conclusion is that, while there are important lessons from the Albanian experience for other ex-communist countries, the presence of large-scale emigration and huge remittance flows makes Albania unique among European countries in transition, in the extent to which these factors aided the anti-inflation programme. However, recent events have demonstrated that political stability and control of the informal financial sector are also crucial for low inflation.

Suggested Citation

  • Sulo Haderi & Harry Papapanagos & Peter Sanfey & Mirela Talka, 1999. "Inflation and Stabilisation in Albania," Post-Communist Economies, Taylor & Francis Journals, vol. 11(1), pages 127-141.
    • Handle: RePEc:taf:pocoec:v:11:y:1999:i:1:p:127-141
    DOI: 10.1080/14631379996075
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    References listed on IDEAS

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    1. Mr. Carlos A. Végh Gramont, 1991. "Stopping High Inflation: An Analytical Overview," IMF Working Papers 1991/107, International Monetary Fund.
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    9. Bruno, Michael & Easterly, William, 1998. "Inflation crises and long-run growth," Journal of Monetary Economics, Elsevier, vol. 41(1), pages 3-26, February.
    10. Calvo, Guillermo A & Vegh, Carlos A, 1995. "Fighting Inflation with High Interest Rates: The Small Open Economy Case under Flexible Prices," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(1), pages 49-66, February.
    11. Peter J. Montiel, 1989. "Empirical Analysis of High-Inflation Episodes in Argentina, Brazil, and Israel," IMF Staff Papers, Palgrave Macmillan, vol. 36(3), pages 527-549, September.
    12. Ahmet Mancellari & Harry Papapanagos & Peter Sanfey, 1996. "Job creation and temporary emigration: the Albanian experience1," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 4(2), pages 471-490, October.
    13. Thomas D. Willett & Fahim Al-Marhubi, 1994. "Currency Policies for Inflation Control in the Formerly Centrally Planned Economies," The World Economy, Wiley Blackwell, vol. 17(6), pages 795-815, November.
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    Cited by:

    1. Ali Termos & Ismail Genc & George Naufal, 2016. "A Tacit Monetary Policy of the Gulf Countries: Is There a Remittances Channel?," Review of Development Economics, Wiley Blackwell, vol. 20(2), pages 599-610, May.
    2. Dabalen,Andrew L. & Kilic,Talip & Wane,Waly & Dabalen,Andrew L. & Kilic,Talip & Wane,Waly, 2008. "Social transfers, labor supply and poverty reduction : the case of Albania," Policy Research Working Paper Series 4783, The World Bank.
    3. Niaz Hussain Ghumro & Mohd Zaini Abd Karim, 2017. "The Role Of Remittances In The Stability Of Money Demand In Pakistan: A Cointegration Analysis," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 62(213), pages 45-66, April - J.
    4. Muco, Marta & Papapanagos, Harry & Sanfey, Peter, 1999. "The Determinants of Official and Free-Market Exchange Rates in Albania during Transition," Journal of Comparative Economics, Elsevier, vol. 27(3), pages 534-552, September.
    5. Lisa Arrehag & Orjan Sjoberg & Mirja Sjoblom, 2005. "Cross-border Migration and Remittances in a post-communist society: Return flows of money and goods in the Korce district, Albania," South-Eastern Europe Journal of Economics, Association of Economic Universities of South and Eastern Europe and the Black Sea Region, vol. 3(1), pages 9-40.
    6. Dirk J. Bezemer, 1999. "Post-Socialist Financial Fragility: the Case of Albania," Tinbergen Institute Discussion Papers 99-045/2, Tinbergen Institute.

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    More about this item

    Keywords

    Inflation; Stabilisation; Remittances; Albania;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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