Euroization Drivers and Effective Policy Response: An Application to the case of Albania

Author/Editor:

Guido della Valle ; Vasilika Kota ; Romain M Veyrune ; Ezequiel Cabezon ; Shaoyu Guo

Publication Date:

January 25, 2018

Electronic Access:

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

This paper proposes a methodology to develop empirically based and theoretically consistent deeuroization policies. It is derived from the experience of Albania. The paper is the first attempt to provide an empirical measure of the optimal level of euroization. The results indicate that euroization is trending above the estimated measure in Albania, calling for deeuroization policies. In the long term, deeuroization requires maintaining the commitment to low and stable inflation in a context of greater exchange rate flexibility to encourage saving in local currency. In the short term, policies that mitigate the financial stability risk due to euroization contribute to deeuroization inasmuch as they make banking intermediation in euro less financially attractive to the public.

Series:

Working Paper No. 18/21

Subject:

English

Publication Date:

January 25, 2018

ISBN/ISSN:

9781484338728/1018-5941

Stock No:

WPIEA2018021

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

30

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