“Fear” of the free exchange rate – The case of Albania Cover Image

“Fear” of the free exchange rate – The case of Albania
“Fear” of the free exchange rate – The case of Albania

Author(s): Krista Kozmai
Subject(s): National Economy, International relations/trade, Financial Markets
Published by: Shtëpia botuese “UET Press”
Keywords: Money; exchange rate; fundamental factors; trade deficit; interventions in the foreign exchange market;

Summary/Abstract: The consumer society of nowdays would have struggled to exist in the last century; money, which today carries no intrinsic value (legal tender), used to hold value by being linked with precious metals. The exchange rates of each country’s currency were determined by the quantity of precious metals each country possessed in tis central bank’s coffers. After the collapse of the fixed-rate system, the determinants of exchange rates have been hard to find. Given that the continuous widening of the Albanian trade deficit, as well as the continuous strengthening of ALL against Euro, this study aims to investigate whether fundamental factors affect the ALL-EUR exchange rate, at all. In addition, this study examines whether this exchange rate has been influenced by the Bank of Albania’s interventions in the (domestic) foreign exchange market. The study is based on a quantitative analysis, with secondary data obtained from INSTAT and the Bank of Albania. The data are quarterly and have been collected for a period of 14 and a half years, from the first quarter of 2008 to the second quarter of 2022. The graphical analysis and regression results showed that fundamental factors significantly affect the ALL-EUR exchange rate and that the interventions by the Bank of Albania, in the foreign exchange market, have not had a statistically significant impact on the (domestic) exchange rate.

  • Issue Year: 22/2023
  • Issue No: 1
  • Page Range: 72-94
  • Page Count: 23
  • Language: English