Monetary transmission mechanism in Albania

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.