Research Papers

Research Papers

The Research Papers consist of research studies and analyses on subjects related to theoretical and practical aspects, relevant for current and future economic and financial developments.

Note: The views expressed in the Research Papers are solely of the author/s and do not necessarily reflect those of the Bank of Albania.

Research Papers

The Price Formation Process in the Albanian Economy: A Macro Modelling Approach
Authors: Lorena Skufi, Eglent Kika
This paper provides the modelling framework of the price formation block in the macro econometric Albanian model (MEAM). MEAM is constructed on neo-Keynesian theoretical principles, implying a vertical long-run aggregate supply curve with aggregate demand factors impacting supply in the short-run.

Households’ Demand in Albania: Measuring the Effects of Income and Price Shocks to Consumer Demand using Micro Data
Authors: Ola Cami
This paper applies a Quadratic Almost Ideal Demand System in Albanian pooled cross-sections data of almost 9000 households for the period 2005-2012. We bring together a comprehensive demand system composed of eight commodity groups matching the Institute of Statistics’ ECOICOP good classification: food, alcohol and tobacco, clothing, utilities, household goods, transportation, entertainment and other goods to obtain income compensated, uncompensated and cross-price price elasticities for each of these commodities.

Financial literacy in Albania: 2015 survey results analysis (November 2018)
Authors: Egnis Isaku, Kliti Ceca, Arlinda Kolenico
This paper presents an analysis of the data collected from the Survey on Financial Literacy at a country level for Albania, according to the methodology developed by OECD/INFE. It reveals the main findings, focusing on the most im-portant aspects of the three components of financial literacy measured by the questionnaire: financial knowledge, behavior and attitudes, as well as indicators of financial inclusion.

A financial cycle for Albania
Authors: Vasilika Kota, Arisa Goxhaj (Saqe)
The assessment of the financial cycle and its various phases is important for building appropriate macroprudential policies and instruments aimed at mitigating systemic risk. The main purpose of this material is to assess the financial cycle in Albania by creating a synthetic indicator as its potential measure.

Natural rate of unemployment – Reduced form approach
Authors: Enian Cela, Lorena Skufi
In this paper, we attempt to estimate a series of the natural rate of unemployment (NAIRU) for Albania in the period 1998-2012 applying a State-Space model featuring Kalman Filter. The approach is based on an Augmented Phillips Curve with NAIRU specified as an unobserved variable. The constraint is activated upon the path of the NAIRU.

Does Primary Sovereignty Risk Matter for Bank Stability? Evidence from the Albanian Banking System
Authors: Gerti Shijaku
This paper analyses empirically the internal and external factors related to banking stability, especially if primary sovereignty risk affects banking stability. For this reason, we have followed a new method for calculating a risk index for the Albanian banking system, which is based on the balance sheet data reported by banks and reflects the banking situation in individual terms. The model is estimated based on a two-step General Method of Moments (GMM) approach with panel data for the period 2008 Q03 – 2015 Q03.

Potential output and growth, output and unemployment gap in Albania – Comparative analysis of recent estimations - 2015
Authors: Evelina Çeliku
The study project aims to re-estimate potential output, the natural rate of unemployment and the respective gaps based on existing and new approaches available in the case of Albania. Results have confirmed that potential growth has shrank and the natural rate of unemployment has increased since 2009. Re-estimations have validated past medium-term projections and monetary policy decision-making. At the same time, they assist in the orientation for structural reforms towards sustainable and inclusive economic growth.

The Effective Lower Bound for the Policy Rate in Euroized Economies - An Application to the Case of Albania
Authors: Guido della Valle, Erald Themeli, Romain Veyrune, Ezequiel Cabezon, Shaoyu Guo
Based on the experience of the Bank of Albania, the paper proposes a framework to estimate the interest rate lower bound in small, open, and euroized economies. The paper introduces a stylized monitoring tool to assess the unintended consequences of low policy rates. The paper is the first attempt to estimate the impact of low interest rate on the public’s demand for banknote by denomination.

A statistical evaluation of gap’s forecasting performance for the Albanian economy
Authors: Meri Papavangjeli, Arlind Rama

This paper aims at offering a statistical evaluation methodology on the forecasting performance of the GAP model, a semi-structural economic model used to support monetary policy decisions at the Bank of Albania since 2011. In this paper we evaluate the forecasts produced purely by the model, and not those used by the Monetary Policy Department, which also include the expert judgment and are not made public. The analytical approach used in the discussion material combines a statistical diagnostic look-up consisting in statistical measurements as RMSE and BIAS important to understand the forecasting performance of the model as an instrument in one, two and three years ahead time horizons.


Fiscal policy, output and financial stress in the case of developing and emerging European economies: a threshold VAR approach
Authors: Gerti Shijaku
The aim of this discussion material will be to examine the effects of fiscal developments on economic activity and on the market condition over time. The study employs a threshold vector autoregressive approach for 10 Developing and Emerging Market economies in the Central Eastern and South Eastern European Countries. The financial stress index is constructed by considering a wide range of market patterns, including banking related stress, money market related stress, exchange markets stress and real estate markets related stress, upon which the threshold upon market condition is build. The threshold VAR model allows to analyse this interrelationship during episodes of economic downturn and stress in financial market. Finally, the empirical work considers a structural identification approach.
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