Research Papers

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.

The paper analyses the performance of the inflation forecasting and its role in the monetary policy decision-making at the Bank of Albania over 2011-2012. The study identifies the main challenges facing the projection process, focusing on published inflation versus the forecasts and expectations values and the monetary policy formulation as well. The accuracy of inflation forecasting models in use is studied through a set of statistical indicators and econometric tests. The results for the entire period 2006-2012 are compared to those of the period 2006-2010. The paper concludes that the combination of all forecasts as simple average has consolidated its position as the most accurate forecast at a 6-quarter horizon, whereas in the 4-quarter one the mean of deviations reaches almost the zero value.

The study is based on the literature started by Frankel and Romer (1999) on using instruments for predicted trade to analyze its effect on growth. It uses panel data to better control for possible time-invariant characteristics. The fall of communism is used as an exogenous shock to the system. The study finds that not all attempts at creating good instruments are successful. However the instruments that perform well lead to results comparable with the existing literature. Trade is found to have a positive and significant effect on a country’s income.

This paper tries to investigate the behavior of fiscal policy and the yield curve in Albania, over the period 1999Q1:2012Q2, by employing impulse response functions obtained by Vector Autoregressive (VAR) model and variance decompositions.

In this paper, we thoroughly analyse the corporate governance practices and its legal framework in the Albanian banking sector. Issues of “gaps” between banking regulation and corporate governance have recently remerged, once the global financial crisis exposed the flaws of past decade’s deregulation process in developed countries. In transition economies, these gaps are outcomes of transition challenges mostly related to the rule of law consolidation, ownership structure and professional and institutional capacities.

This paper aims at serving as a starting point for an alternative approach to analyse and monitor the fiscal position in Albania. The approach used up to date to assess the fiscal position in Albania refers to budget indicators expressed in nominal terms. Nominal budgetary figures also hold effects caused by temporary factors in the economy that go beyond the scope of fiscal policy. In order to evaluate the fiscal position of Albania, we propose an alternative approach that helps estimate the cyclically-adjusted budget balance with a view to capture only the effects of discretionary fiscal policy on the budget balance, by dampening or eliminating the effect of cyclical factors on budget indicators.

A survey with 200 individuals was conducted, during February - March 2012, in the framework of estimating the usage of payment instruments and the responses are analysed. The survey took place in Tirana–Durrës area with the highest concentration of population and banking transactions as well. The study is based on a public survey. It reflects the evaluations of respondents about the questions they were exposed. The main findings of the survey consist on: a considerable development of banking instruments usage compared to some years earlier; support to the Bank of Albania’s projects related to financial literacy; the deepening of financial literacy and turning it into a general culture; monitoring of public financial literacy; a deeper perception of issues on transparency about the usage of payment instruments.