{
  "title": "Albania: Selected Issues",
  "publication": "IMF Staff Country Reports, January 24, 2025",
  "sourceUrl": "https://www.imf.org/en/publications/cr/issues/2025/01/24/albania-selected-issues-561204",
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  "summary": "This Selected Issues paper examines the case for foreign exchange intervention (FXI) in the context of Albania by estimating an integrated policy framework (IPF) model to quantitatively illustrate relevant policy trade-offs.",
  "sections": [
    {
      "heading": "Overview",
      "content": "- Examines the case for foreign exchange intervention (FXI) in the context of Albania by estimating an integrated policy framework (IPF) model to quantitatively illustrate relevant policy trade-offs.\n- A version of the quantitative IPF (QIPF) model is estimated for Albania to examine the merits of FXI in response to shocks amid shallow FX markets."
    },
    {
      "heading": "Model and shocks considered",
      "content": "- Quantitative tool: quantitative IPF (QIPF) model estimated for Albania.\n- Two specific shock types analyzed:\n  - (1) a fundamental shock in the form of a tourism boom.\n  - (2) a nonfundamental shock in the form of exogenous portfolio inflows caused by a risk-on episode."
    },
    {
      "heading": "Main findings",
      "content": "- Exchange rate volatility driven by nonfundamental factors may present policymakers with a trade-off between stabilization objectives.\n- Adverse impacts from risk shocks can be addressed using FXI.\n- A better tool to address temporary inefficient capital flow shocks is a sterilized FX intervention, provided that:\n  - markets are sufficiently shallow, and\n  - an appropriate buffer of reserves is available.\n- In cases of nonfundamental shocks, the scenario analysis suggests that interventions could be beneficial by lowering output and inflation volatility."
    },
    {
      "heading": "Policy recommendations and considerations",
      "content": "- Consider letting the exchange rate adjust more flexibly.\n- Rely on interest rate policy as the primary tool for price stability.\n- Use sterilized FX intervention selectively for temporary inefficient capital flow shocks when conditions (market shallowness and reserve buffer) are met."
    },
    {
      "heading": "Risks, trade-offs, and caveats",
      "content": "- Authorities should internalize potential adverse consequences of FXI, including impacts on:\n  - risks to the central bank balance sheet,\n  - interest rate transmission, and\n  - financial market development.\n\nSource: International Monetary Fund. European Dept. \"Albania: Selected Issues\", IMF Staff Country Reports 2025, 021 (2025).\n\n---\n\n Content in this bundle\n\n- Albania: Selected Issues; IMF Country Report No. 25/21; December 17, 2024\n  - Albania: Selected Issues; IMF Country Report No. 25/21; December 17, 2024 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Albania: Selected Issues; IMF Country Report No. 25/21; December 17, 2024 (PDF){rel=\"external\" type=\"application/pdf\"}"
    }
  ],
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    "[Markdown version](/en/publications/cr/issues/2025/01/24/albania-selected-issues-561204/index.md)",
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    "Published: January 24, 2025",
    "Series: IMF Staff Country Reports",
    "DOI: https://doi.org/10.5089/9798400299902.002",
    "Examines the case for foreign exchange intervention (FXI) in the context of Albania by estimating an integrated policy framework (IPF) model to quantitatively illustrate relevant policy trade-offs.",
    "A version of the quantitative IPF (QIPF) model is estimated for Albania to examine the merits of FXI in response to shocks amid shallow FX markets.",
    "Quantitative tool: quantitative IPF (QIPF) model estimated for Albania.",
    "Two specific shock types analyzed:",
    "Exchange rate volatility driven by nonfundamental factors may present policymakers with a trade-off between stabilization objectives.",
    "Adverse impacts from risk shocks can be addressed using FXI.",
    "A better tool to address temporary inefficient capital flow shocks is a sterilized FX intervention, provided that:",
    "In cases of nonfundamental shocks, the scenario analysis suggests that interventions could be beneficial by lowering output and inflation volatility.",
    "Consider letting the exchange rate adjust more flexibly.",
    "Rely on interest rate policy as the primary tool for price stability.",
    "Use sterilized FX intervention selectively for temporary inefficient capital flow shocks when conditions (market shallowness and reserve buffer) are met.",
    "Authorities should internalize potential adverse consequences of FXI, including impacts on:",
    "**Albania: Selected Issues; IMF Country Report No. 25/21; December 17, 2024**"
  ],
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      "title": "Albania: Selected Issues; IMF Country Report No. 25/21; December 17, 2024",
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