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Inflation and Stabilization in Albania

Sulo Haderi, Harry Papapanagos (), Peter Sanfey and Mirela Talka

Studies in Economics from School of Economics, University of Kent

Abstract: This paper analyses the determinants of inflation in Albania during the transition period. We attempt to explain how albania has been so successful in reducing inflation to a level comparable to many countries in the European Union. We discuss the relative importance of monetary, fiscal, and external variables, and in particular, we highlight the role of remittances and private transfers by emigrants. Using vector autoregression analysis, we demonstrate how shocks to remittances affect the subsequent paths of inflation and the exchange rate. Our main conclusion is that, while there are important lessons from the Albanian experience for other ex-communist countries, the presence of large-scale emigration and huge remittance flows make Albania unique among European countries in transition, to the extent that these factors aided the anti-inflation programme.

Keywords: Inflation; Stabilization; Remittances; Albania (search for similar items in EconPapers)
JEL-codes: E31 E63 O52 (search for similar items in EconPapers)
Date: 1996-09
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Published in Post-Communist Economies, 1999, 11(1), pp.127-141

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