The Rise and Fall of the Pyramid Schemes in Albania

IMF Working Papers, July 1, 1999

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The Rise and Fall of the Pyramid Schemes in Albania

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Bibliographic details

• Authors: Christopher J. Jarvis
• Published: July 1, 1999
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451852127.001

Overview and central question

• Examines lessons from the unprecedented growth and spectacular collapse of financial pyramid schemes in Albania.
• Discusses origins of the pyramid schemes and the way the authorities handled them.
• Analyzes the economic effects of the pyramid schemes.
• Concludes that, despite the descent into anarchy triggered by the schemes’ collapse, their direct effects on the economy are difficult to specify and appear to have been limited.
• Argues that prevention of pyramid schemes is better than cure; governments and international financial institutions should be vigilant in clamping down on frauds.

Key findings and analysis

• The paper discusses:
  • Origins of the pyramid schemes.
  • How the authorities handled the schemes.
  • The economic effects of the pyramid schemes.
• Conclusion on economic impact:
  • The direct effects on the economy are difficult to specify.
  • The direct effects appear to have been limited.
• Political and social consequences:
  • The schemes’ collapse precipitated a descent into anarchy.

Policy recommendations and implications

• Prevention is preferable to cure for dealing with pyramid schemes.
• Governments should be vigilant in clamping down on frauds.
• International financial institutions should likewise be vigilant in clamping down on frauds.

Subjects and keywords

• Subject: Bank deposits, Banking, Commercial banks, Credit, Currencies, Exchange rates, Financial institutions, Foreign exchange, Inflation, Money, Prices
• Keywords: a number of company, banking system, borrowing company, Commercial banks, Credit, credit market, Currencies, Democratic Party government, Europe, Exchange rates, government statement, Inflation, Ponzi scheme, Ponzi schemes, pyramid scheme company, pyramid scheme phenomenon, Pyramid schemes, trading profits, WP

Content in this bundle

• The Rise and Fall of Pyramid Schemes in Albania - WP/99/98
  • The Rise and Fall of Pyramid Schemes in Albania - WP/99/98 (Markdown version)
  • The Rise and Fall of Pyramid Schemes in Albania - WP/99/98 (PDF)