The Appreciation of the National Currency in Albania: Does Informality Matter?

Emiljan Karma – Catholic University Our Lady of Good Counsel, Faculty of Economic, Political and Social Sciences, Rruga Dritan Hoxha 23, 1064, Tirana, Albania

Abstract: This study aims to identify the factors that contributed to the ap­preciation of the Albanian LEK against the EURO, given the increasing euroi­zation of the Albanian economy. The study uses ARDL analysis and quarter­ly data from 2008Q1–2023Q3 to examine the primary influences on curren­cy exchange rate variations, as per economic theory.

The study’s findings indicate that conventional economic variables have lit­tle impact on exchange rate variations. However, the study found that remit­tances and GDP do have a significant impact on the EUR/LEK exchange rate.

This study also leaves room to highlight the role of informality in explaining this phenomenon. Therefore, policymakers may need to intervene in this situa­tion, through formal channel transactions (using financial institutions), which must be carried out in the LEK currency, and secondly, through a monetary in­tervention aimed at creating a more balanced EURO/LEK exchange rate.

8th International Scientific Conference – EMAN 2024 – Economics and Management: How to Cope With Disrupted Times, Rome, Italy, March 21, 2024, SELECTED PAPERS, published by: Association of Economists and Managers of the Balkans, Belgrade, Serbia; ISBN 978-86-80194-84-4, ISSN 2683-4510, DOI: https://doi.org/10.31410/EMAN.S.P.2024

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