## Albania: Selected Issues

_IMF Staff Country Reports, January 24, 2025_

## Source details

**Canonical URL:** [Albania: Selected Issues](https://www.imf.org/en/publications/cr/issues/2025/01/24/albania-selected-issues-561204)

## Other formats

- [Markdown version](/en/publications/cr/issues/2025/01/24/albania-selected-issues-561204/index.md)
- [Structured JSON version](/en/publications/cr/issues/2025/01/24/albania-selected-issues-561204/index.json)
- [Bundle manifest](/en/publications/cr/issues/2025/01/24/albania-selected-issues-561204/bundle-manifest.json)

## Bibliographic details
- Published: January 24, 2025
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9798400299902.002

---

### Overview
- 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.

### Model and shocks considered
- Quantitative tool: quantitative IPF (QIPF) model estimated for Albania.
- Two specific shock types analyzed:
  - (1) a fundamental shock in the form of a tourism boom.
  - (2) a nonfundamental shock in the form of exogenous portfolio inflows caused by a risk-on episode.

### Main findings
- 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:
  - markets are sufficiently shallow, and
  - an appropriate buffer of reserves is available.
- In cases of nonfundamental shocks, the scenario analysis suggests that interventions could be beneficial by lowering output and inflation volatility.

### Policy recommendations and considerations
- 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.

### Risks, trade-offs, and caveats
- Authorities should internalize potential adverse consequences of FXI, including impacts on:
  - risks to the central bank balance sheet,
  - interest rate transmission, and
  - financial market development.

*Source: International Monetary Fund. European Dept. "Albania: Selected Issues", IMF Staff Country Reports 2025, 021 (2025).*

---

## Content in this bundle

- **Albania: Selected Issues; IMF Country Report No. 25/21; December 17, 2024**
  - [Albania: Selected Issues; IMF Country Report No. 25/21; December 17, 2024 (Markdown version)](/-/media/files/publications/cr/2025/english/1albea2025002-print-pdf.pdf.md){rel="alternate" type="text/markdown"}
  - [Albania: Selected Issues; IMF Country Report No. 25/21; December 17, 2024 (PDF)](/-/media/files/publications/cr/2025/english/1albea2025002-print-pdf.pdf){rel="external" type="application/pdf"}

---

_Source: https://www.imf.org/en/publications/cr/issues/2025/01/24/albania-selected-issues-561204_