Albania's Central Bank's Monetary Policy Has Failed

Abstract

The subject of this paper will be the Central Bank's monetary policy in terms of the Albanian monetary market. Its purpose will be to determine the effects of monetary policy, its consequences on some of the key macroeconomic indicators. From the analysis of data, it was found that the Central Bank's policy, which has its main objective, "achieving and preserving the level of prices", is applied in the conditions of an unequal monetary market, because the money market is almost divided equal to 50/50 between currency and local currency (All). These main internal factors, and other external factors, have made the monetary policy applied by the Central Bank to have no impact or have negative consequences on key macroeconomic indicators. Central Bank monetary policy is currently smothered. Some of the negative consequences are: the decline of the impact on the inflation indicator, the transition of the Albanian economy to the "liquid trap", the change in the structure of deposit usage in favor of debt instruments, decrease of deposits in total and deposits in lek, the decline in purchasing power of deposits, the reduction of credit and the change of their structure, consequently the reduction of productive investments, euro depreciation, trade deficit growth, etc. Under these conditions, only fiscal policies have an impact. In order for the Central Bank's policies to become effective, with concrete implications on the economic indicators, fundamental changes need to be made. First, change its main objective by having the main objective "currency stability and economic growth" secondly, to establish a fully state-owned commercial bank in order to support the monetary policies and key sectors of the economy. The methods used in this paper are the method of description, comparison, analysis and synthesis, statistical methods etc.