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A Monetary Conditions Index For Albania

Author

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  • Arjeta Vokshi (Abazi)

Abstract

The goal of the construction of a Monetary Conditions Index (MCI) is to analyze both the interest rate channel and the exchange rate channel. The construction is based on standard open economy macroeconomic models. MCI is the weighted sum of the change in short-term interest rate and the exchange rate with the base period, with weights that are usually taken from empirical econometric models and that reflect the estimated impact of these variables to the product or to inflation. MCI change, gives in a single number the degree of narrowing or release (expansion) of monetary conditions. In this paper is proposed a MCI for Albania. Based in the calculations done by the author and after the comparison of this type of MCI with the type of MCI calculated from Bank of Albania, the author recommends to Bank of Albania the use of the MCI calculated in this paper. The reason of this recommendation is the more accurate description and explanation of monetary policy stance obtained from the use of MCI calculated in this paper.

Suggested Citation

  • Arjeta Vokshi (Abazi), 2013. "A Monetary Conditions Index For Albania," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 1(15), pages 1-18.
    • Handle: RePEc:alu:journl:v:1:y:2013:i:15:p:18
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    File URL: http://oeconomica.uab.ro/upload/lucrari/1520131/18.pdf
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    References listed on IDEAS

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    1. Eika, Kari H & Ericsson, Neil R & Nymoen, Ragnar, 1996. "Hazards in Implementing a Monetary Conditions Index," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(4), pages 765-790, November.
    2. Wensheng Peng & Frank Leung, 2005. "A Monetary Conditions Index for Mainland China," Working Papers 0501, Hong Kong Monetary Authority.
    3. Zulfiqar Hyder & Muhammad Mazhar Khan, 2007. "Monetary Conditions Index for Pakistan," SBP Research Bulletin, State Bank of Pakistan, Research Department, vol. 3, pages 165-190.
    4. C. Paul Hallwood & Ronald MacDonald, 2002. "A Method for Indicating Economic Transition with an Application to Albania," Eastern Economic Journal, Eastern Economic Association, vol. 28(4), pages 465-480, Fall.
    5. Mr. Christian H. Beddies, 2000. "Selected Issues Concerning Monetary Policy and Institutional Design for Central Banks: A Review of Theories," IMF Working Papers 2000/140, International Monetary Fund.
    6. Gerlach, Stefan & Smets, Frank, 2000. "MCIs and monetary policy," European Economic Review, Elsevier, vol. 44(9), pages 1677-1700, October.
    7. Mr. Mohsin S. Khan, 2003. "Current Issues in the Design and Conduct of Monetary Policy," IMF Working Papers 2003/056, International Monetary Fund.
    8. Richard Dennis, 1997. "A measure of monetary conditions," Reserve Bank of New Zealand Discussion Paper Series G97/1, Reserve Bank of New Zealand.
    9. Mehtap Kesriyeli & I.Ilhan Kocaker, 1999. "Monetary Conditions Index : A Monetary Policy Indicator For Turkey," Discussion Papers 9908, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
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    Cited by:

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    2. Mna, Ali & Younsi, Moheddine, 2018. "A Monetary Conditions Index and its Application on Tunisian Economic Forecasting," MPRA Paper 83648, University Library of Munich, Germany.

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    More about this item

    Keywords

    monetary policy; interest rate; exchange rate; Monetary Conditions Index; real effective exchange rate;
    All these keywords.

    JEL classification:

    • E - Macroeconomics and Monetary Economics
    • E - Macroeconomics and Monetary Economics

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