Euroization Impact on GDP Growth and the Appropriate Policy Responses: A QTM Approach.

Altin Zefi, Elona Shehu


This study is focused on the effect of the money unification process of Albania and
mainly in the effect of this process into the money supply. During the recent discussions
about integrating our country into the European Monetary Union, a money illusion
was conceived without taking into the consideration the rational effects of this process
into the savers of the economy. Beyond this illusion after analyzing the advantages
and disadvantages of the unification process this paper aims to look up into
the main obstacles this process bears; for instance, this article carefully observes
the misalignment issue of inflation and exchange rate after the possible currency
conversion in Albania. The main indicators on which our analysis is based are: money
supply, interest rates, targeted inflation, GDP and velocity of money velocity. Further
this paper aims to examine the relationship between money supply, GDP and targeted
inflation. Based on this study we drive these following issues to a solution on the
reference of Fishers Quantitative Theory of Money. The methodology of the study is a
quantitative analysis based on secondary data. The study finds significant evidence
about the existence of a negative relationship between euroization level and GDP
growth for Albania. The study also finds a strong influence of credit euroization and
inflation. This research paper opens a new lieu of discussion in terms of academic
and decision making debates.
Keywords: Euroization, Money supply, GDP growth, Targeted inflation,
Albania, Financial system

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