Research Papers

The paper studies and proposes the density estimation methodology as an alternative of modelling the economy as a set of economic variables. In the study, we pose the density estimates for economic variables in one and multidimensional case. This is done using several kernels, which are selected as probability density functions. In the one dimensional case, Gaussian, triangle, rectangle and Epanechnikov kernels are used. In the multidimensional case, Gaussian and Epanechnikov kernel are used. For the first time, we give the form of the densities (density estimates) of economic variables in their general form, based on density estimatio methods.

The recent financial crisis has highlighted the important role of the financial system in the overall economic performance and the individual sectors of the economy. The importance of the financial channels has been argued even before the onset of the crisis, by Bernanke et al., (1999) who have considered them both as amplifiers and sources of business-cycle fluctuations. On the other hand, other authors, such as Meier and Mueller (2006), find that these channels are more important in times of deep financial stress than in normal times. This discussion has become crucial during the latest decade, which has experienced a fast growth of the financial markets and especially of the banking sector in the emerging economies.

Income and price elasticities account for the size of the transmission among trading partners in real activity. The recent economic slowdown in advanced economies has become a concern for the growth rate in developing countries. Of a particular interest is the role of exports as a source of growth engine. Estimation of income and price elasticities of real trade volumes allows for an evaluation of the extent of such interrelationship and the Marshall- Lerner condition. Results show that while income is the main driver of trade flows in Albania, exchange rate plays a significant role in fostering export growth and substituting imports.

This study evaluates the effects of exchange rate on bilateral trade flows between Albania and its main trading partners namely: Euro area, China, Greece, Germany, Italy, Kosovo and Turkey. The material seeks empirical evidences on the existence of the “J – curve” phenomenon in bilateral trade for the 1998 – 2012 period. The “error – correction model” approach seems to be the appropriate econometrical model in identifying the short and long-run effects of the real depreciation of the domestic currency (Albanian Lek) on bilateral trade balances between Albania and its main trading partners.

Identifying the deficiencies and finding the proper ways for an increasingly efficient approach to real needs of the public play an important role in creating and adapting educational programmes. For the first time in Albania, this information is obtained from the survey on measuring the financial literacy of the population, 2011, which was one of activities projected under the EU-funded Twinning Project between the Bank of Albania, the Bank of Italy and the Bank of France.

This discussion paper focuses on identifying and evaluating the long run determinants of bank credit to the private sector in the case of Albania by employing a Vector Error Correction Mechanism (VECM) approach based on demand and supply indicators. Estimations show that an adjustment mechanism exists bringing bank credit back to equilibrium. The results imply that lending is positively linked to economic growth.