Euroization Drivers and Effective Policy Response: An Application to the case of Albania
IMF Working Papers, January 25, 2018
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- Euroization Drivers and Effective Policy Response: An Application to the case of Albania
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Bibliographic details
- Authors: Guido della Valle, Vasilika Kota, Romain M Veyrune, Ezequiel Cabezon, Shaoyu Guo
- Published: January 25, 2018
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484338728.001
Authors and publication
- By Guido della Valle, Vasilika Kota, Romain M Veyrune, Ezequiel Cabezon, Shaoyu Guo
- January 25, 2018
Summary and principal finding
- The paper proposes a methodology to develop empirically based and theoretically consistent deeuroization policies, derived from the experience of Albania.
- It is the first attempt to provide an empirical measure of the optimal level of euroization.
- Main empirical result: euroization is trending above the estimated measure in Albania, calling for deeuroization policies.
Policy implications — long term
- Maintain the commitment to low and stable inflation.
- Increase exchange rate flexibility to encourage saving in local currency.
Policy implications — short term
- Implement policies that mitigate the financial stability risk due to euroization.
- Such short-term measures contribute to deeuroization insofar as they make banking intermediation in euro less financially attractive to the public.
Thematic scope and keywords
- Subjects: Bank deposits; Banking; Currencies; Exchange rate risk; Exchange rates; External debt; Financial regulation and supervision; Financial services; Foreign exchange; Money.
- Keywords: Bank deposits; banknotes in circulation; Currencies; dollarization; euroization; euroization trend; Europe; Exchange rate risk; exchange rate volatility; Exchange rates; financial asset; financial stability; foreign currency intermediation; foreign currency loan; foreign currency loans vis-à-vis; foreign currency reserve; interest rate; loan euroization; loans vis-à-vis; opportunity cost; reserve requirement; WP.