The Influence of Exchange Rate on Inflation in Albania: Study Period 2010-2022
The Influence of Exchange Rate on Inflation in Albania: Study Period 2010-2022

Author(s): Jonida Methasani, Enida Zhugri
Subject(s): Politics / Political Sciences, Politics, Economy, National Economy, EU-Accession / EU-DEvelopment, Fiscal Politics / Budgeting
Published by: Университет за национално и световно стопанство (УНСС)
Keywords: exchange rate; inflation; economic growth; the Albanian economy
Summary/Abstract: This paper studies the exchange rate in Albania and its relationship with inflation. Recently, the exchange rate has been emphasized as a shock absorber in the literature on transition nations, downplaying its costs to macroeconomic stabilization. However, the costs and benefits of a previous exchange rate instrument determine the decision to use a different exchange rate regime. The paper’s first section presents a survey of the literature on the connection between inflation and the exchange rate. The performance of the ALL/ EUR exchange rate is discussed, as the euro accounts for the majority of transactions in our country’s trade with other countries. The study of the effect of the exchange rate on economic indicators such as inflation is the last part of the study, for which we developed a simple regression model to explain the relationship between the two variables.

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