The macroeconomic pass-through effects of monetary policy through sign rectrictions approach: In the case of Albania

The monetary transmission mechanism has been an integrated part of empirical and analytical study at the Bank of Albania, trying to identify the impact of the traditional interest rate and exchange rate channels on output and inflation. However, after the global financial and economic crises, little is known about the macroeconomic pass-through effects of monetary policy changes. This paper examines the transmission mechanism of the monetary policy in Albania during 2002 M01 - 2014 M12. The main question addresses the macroeconomic pass-through effects of a monetary policy shock. The analysis is based on a structural vector autoregressive model for the Albanian economy that includes means sign restrictions approach to identify the monetary policy shock effects with regards to a conventional interest rate and possible different balance sheet policy changes.