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
Nowcasting quarterly GDP in Albania
Authors: Armela Mancellari
The quarterly Gross Domestic Product in Albania is published with
a lag of 12 weeks (three months) from the reference quarter. In
between, it is important for policy makers to have an evaluation of
the aggregate demand and domestic output, to be able to take wellinformed
decisions and implement economic policy effectively. For this
purpose, this study tests the predicting power of different economic
indicators that are available before the quarterly GDP publication.
The immediate-term forecasting, a.k.a. nowcasting, is obtained with
ADL (p, q) equations, and estimated with OLS. Main results reveal
that ‘auto sales and repairs’- a hard indicator -, has the highest
predicting power among all tested variables, followed by qualitative
(survey) indicators like ‘the industrial sector’s evaluation of current
demand’, ‘the industrial sector’s evaluation of current production’,
‘the industrial sector’s expectations on next quarter’s production’,
‘the construction sector’s evaluation of current production’, and ‘the
services sector’s evaluation of current demand’. These qualitative
indicators are disaggregated indices of the Bank of Albania’s
Consumer and Business Surveys. The final nowcasting model includes
‘auto sales and repairs’ and ‘the construction sector’s evaluation of
current production’. Selected candidate models outperform naïve
and ARIMA models.
Keywords: nowcasting, qualitative indicators, Gross Domestic Product,
Albania
JEL classification: C22, C53, E17
Determinants of net interest margin in the Albanian banking system
Authors: Irini Kalluci
Research on banking system efficiency has always been a debatable
and interesting issue. This paper analyses net interest margin as
a measure of efficiency for the banks which operate in Albanian
banking system and the main focus is the identification of the factors
that affect this indicator. According to the estimations carried out for
the Albanian banking system, the results show that the net interest
margin is positively affected by the interest rate volatility (mainly of
euribor, domestic currency’s and slightly of the libor rate), by the level
of operating expenses which have had an increasing tendency and
by the amount of banks’ reserves in the Central B ank. Other factors
that affect the net interest margin are the level of bank capitalization,
which should be interpreted with caution; net commission incomes
which are negatively related to the dependent variable implying that
these two indicators are substitutes of each-other; the effectiveness
of management work; credit risk and the concentration level in terms
of loans.
Monetary policy: Institutional and operational framework toward a forward-looking regime
Authors: Gramoz Kolasi, Bledar Hoda, Sofika Note
Monetary policy at the BoA has evolved to approach itself in line
with contemporary frameworks that meet most elements promoting
efficiency and effectiveness. In this paper, we make an attempt to
outline the introduction of new aspects as well as improvements to
the current set up. In the past two years, The Bank of Albania has
arranged two Forums, in December 2 005 and 2 006, in order to
assess the conditions for a formal revision of its institutional and
operational procedures of monetary policy. In addition, these
Forums have contributed to escalate and institutionalize the BoA’s
efforts to promote financial development and infrastructure as
well as improve its operational and institutional framework for a
more effective monetary policy. In this year’s meeting, we come
up with an overall outline of the tasks completed, mostly proposed
and elaborated in the last two forums, and a general assessment
of the most required conditions towards a fully-fledged IT regime
for Albania.
Macro-econometric model of Albania: A follow-up
Authors: Vasilika Kota, Elona Dushku
This paper follows up on the previous paper titled “A macro
econometric model approach for Albania”. The objective is to
present the progress of the macro-model during 2007. Actually, the
model is enriched with the supply side and fiscal sector and includes
the main channels of the transmission mechanism of the monetary
policy. We have applied a new method of disaggregating annual
to quarterly data and also some new definition of key variables,
such as disposable income. The results indicate that the model is
stable, it converges in the long run to its desirable path and it may
be suitable for different policy scenarios. On the other hand, the
forecast performance of the model was so far not analysed.
Measuring inflation expectations
Authors: Gent Hashoriva, Elona Bollano, Elvana Troqe
This paper attempts to apply some approaches in order to quantify the
responses collected via the Consumer Confidence Survey conducted
by the Bank of Albania. Moreover, it attempts to better understand the
nature of consumer inflation expectations in Albania, which result to be
adaptive. Accordingly, if the inflation rate increases, consumers expect
an even greater increase of inflation in the subsequent period.
Financial developmment and economic growth: The Albanian case
Authors: Elona Dushku
This paper examines the causal relationship between financial
development and economic growth for the Albanian economy using
the Granger causality test for five different proxies for financial
development. For the non-stationary and non-cointegrated series, the
VAR model has been constructed and later, the above test has been
applied. For non-stationary series but with a cointegrating relationship,
the Granger-causality test has been applied after the construction of
the vector error correction model (VECM). The empirical findings of
the study show that there is a positive relation between all indicators
measuring the financial development and economic growth in the
long term. While in the short term, this relation is quite vague since
different indicators provide different results. The data used in this
paper belong to the period 1996-2007.
Monetary transmission mechanism in Albania
Authors: Gramoz Kolasi, Hilda Shijaku, Diana Shtylla
This paper revisits the monetary transmission mechanism in
Albania, summarizing findings of previous studies and presenting
new evidence based on a SVAR estimation. We investigate the
effect of monetary transmission channels on aggregate output
and headline and core inflation. We conclude that the exchange
rate channel is not as strong as reported in previous works, and
that the money and expectations channel play the most important
role within the transmission mechanism. Our findings also suggest
that the Bank of Albania should pay attention to the exchange
rate fluctuations, as they seem to have an adverse impact on real
output fluctuations.
Modelling the quarterly GDP - Role of economic and surveys indicators
Authors: Evelina Çeliku, Ermelinda Kristo, Merita Boka
The quarterly GDP forecasting models developed in this material aim
to estimate the Albanian GDP trends in the short term. . Delays until
the publication of the official quarterly GDP data make indispensable
the preliminary estimation of this indicator. The modelling strategy of
the quarterly GDP consists in building a set of different models for its
estimation. They consist on ARIMA models with seasonal components
and indicator models, similar to bridge models. This paper presents a
first attempt to model the GDP using a multiequations system which
accounts for the sectoral interactions. This model can not be used
for forecasting purposes because of short time series. The estimates
were made for total and for disaggregated sectoral GDP for the
period: Q1:2003 – Q1:2009. The models exploit information from
economic variables, financial variables and confidence surveys
indicators, held by the Bank of Albania. The bridge models estimates
show that the past developments of economic and financial variables
explain the GDP changes while the survey variables lead them. The
above mentioned behaviour of the explanatory variables supports the
forecasting process of the quarterly GDP. Thus the policy makers in
the Bank of Albania are provided with a timely estimation (nowcast)
of the economic activity tendency for the reference quarter and for
the coming two quarters. In general, estimations from the developed
models are promising. It is suggested that the “best” forecast will be
considered the average of the forecasts from all the proposed models.
The off-sample forecast performance, “will decide” the model with
the best qualities in order to predict the quarterly GDP.
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