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Article

Open Access

The Monetary Policy of the Central Bank of Albania: Historical Perspective and Future Challenge

Author(s)

Jonida Teta

Full-Text PDF Download XML 725 Views

DOI:10.17265/1548-6591/2018.03.006

Affiliation(s)

Polytechnic University of Tirana, Tirana, Albania

ABSTRACT

The evolution of monetary policy framework in Albania has reflected its dynamic environment of a transition developing country economy. The Bank of Albania (BOA) has always followed an ultimate goal of price stability and has operated a flexible exchange rate. However, the monetary regime, including its analytical framework strategy, has constantly evolved. Attached in International Monetary Fund (IMF) stabilization programs, the BOA adopted initially a monetary targeting regime. Fiscal discipline and rapid budget consolidation were certified by strict IMF. Together with other structural reforms, it allowed to the prudent monetary policy to quickly disinflate the economy throughout the 1990’s. However, the rapid development of the economy and financial markets made a transmission mechanism based on astable relationship between monetary and prices ever less predictable. Money growth became less reliable as an indicator of medium term price development. This needed profound change in the BOA monetary policy strategy. The BOA modified its monetary policy by broadening the range of information; it included in its decision-making, by continuously refining its monetary operations and by continuously improving its transparency and communication. This transformation and flexibility allowed the BOA to deliver on its mission of price and stability through its second decade of life. This research paper gives a broad overview of monetary policy development during the first two decades. The second section provides a critical review of the overall results of BOA monetary policy and some challenges and conclusions that are expected in the future.

KEYWORDS

monetary policy, BOA, monetary policy regime

Cite this paper

Journal of US-China Public Administration, March 2018, Vol. 15, No. 3, 150-153

References

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