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Title: An assessment of monetary policy in Albania since 1990
Author: Shijaku, Hilda
ISNI:       0000 0004 2736 8120
Awarding Body: Staffordshire University
Current Institution: Staffordshire University
Date of Award: 2008
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It has been argued that monetary policy in Albania conducted under the IMF's financial programming has provided a successful framework for balancing the economy through the past decade. Following recent trends in monetary policy in other countries, and a perceived uncertainty about the evolution of Albanian monetary aggregates, the Central Bank of Albania has announced the introduction of inflation targeting in the medium term. The purpose of this thesis is to assess monetary policy in Albania during the last decade and to reflect on its likely future development. In order to understand the decision-making process in the Bank of Albania given the IMF's role in the formulation of policies, the IMF view is critically examined in the light of Western and transition economies' experiences. As a contribution to knowledge, we test the crucial assumption of that programme: that of the stability of the demand for money. We critically examine the standard eo integrating techniques prevailing in the money demand estimation literature and contribute to knowledge by constructing a model which is broadly satisfactory on both theoretical and empirical grounds. We show that use of single equation techniques do not satisfy the requirement of no simultaneity between monetary aggregates and other variables in our dataset, while using a system of equations a long run cointegration of the monetary aggregate and other variables of interest is found in the form of a money demand equation, once a structural break occurring in 1997 is taken into account. We also examine the transmission mechanisms in order to identify the role of monetary policy in stabilising the economy. By formulating our work in a SV AR context we find no significant interest rate effects on both the price level and output, while shocks in the exchange rate induce output variability, thus suggesting that the authorities should consider exchange rate stabilisation in their reaction rule. Using our findings, we conduct an assessment of the financial programming in Albania, examining the various steps of this strategy and argue that econometric estimation of the money demand relationship could replace the use of quantity theory of money postulating stationarity of money velocity. Based on our own findings, we critically assess a new macromodel being developed by the Bank of Albania and suggest among other things, that the simultaneous modelling of key relationships should include transmission channels, via the exchange rate, and the inclusion of monetary aggregates in the model to inform policy making.
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available