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The Impact of Real Exchange Rate on Economic Growth in Albania

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  • Edmira Cakrani

    (University of Vlora Ismail Qemali)

Abstract

Real exchange rate is one of the most important economic variables, especially in today's conditions of integration processes, the removal of trade barriers and increasing direct competition between countries. Real exchange rate affects economy, through its impact on key economic variables, such as employment, inflation and especially economic growth. Changes in the real exchange rate affect the competitiveness of domestic products, resulting in increased exports or imports, affecting trade balance e growth. Also changes in the real exchange rate affect investment and capital accumulation, which are directly linked with economic growth. The aim of this paper is to study the possible impact of the real exchange rate on economic growth in Albania, to answer the question whether the real exchange rate can be used as an instrument of policy. Johansen cointegration method and Vector Error Correction Model is used in this paper to identify the longterm and short-term impact of real exchange rate on economic growth in Albania. Results of the study indicate that the real exchange rate has no significant impact on the Albanian economy, suggesting that policies to promote economic growth, both in the short and long term should not rely on this variable.

Suggested Citation

  • Edmira Cakrani, 2014. "The Impact of Real Exchange Rate on Economic Growth in Albania," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 10(1), pages 141-147, February.
    • Handle: RePEc:dug:actaec:y:2014:i:1:p:141-147
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    File URL: http://journals.univ-danubius.ro/index.php/oeconomica/article/view/2029/2063
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    References listed on IDEAS

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    Cited by:

    1. DO Thi My Huong, 2019. "Real Exchange Rate and Economic Growth: An Empirical Assessment for Vietnam," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 9(6), pages 680-690, June.

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