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Post-socialist Financial Fragility: The Case of Albania

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  • Bezemer, Dirk J

Abstract

The 1997 collapse of the Albanian economy caused by the collapse of economy-wide Ponzi schemes contrasts sharply to its success status as a post-Socialist transition country in the years 1992-96. In this paper, an attempt is made to explain this "Albanian Paradox". The specific Albanian conditions for the growth of Ponzi schemes are identified. Theoretically, the Albanian Paradox can be interpreted as one version of the "Financial Instability Hypothesis" suggested by Minsky. Investigation of the underlying factors that render financial markets fragile suggest that the Albanian case is extreme but not unique in the region. It is emphasised that sustainable growth is predicted on the quality of government, on proper financial-sector regulation, on actual microeconomic restructuring and on the development of market institutions through which adequate market information is disseminated. Copyright 2001 by Oxford University Press.

Suggested Citation

  • Bezemer, Dirk J, 2001. "Post-socialist Financial Fragility: The Case of Albania," Cambridge Journal of Economics, Oxford University Press, vol. 25(1), pages 1-23, January.
  • Handle: RePEc:oup:cambje:v:25:y:2001:i:1:p:1-23
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    Cited by:

    1. Klarita Gërxhani & Arthur Schram, 2009. "Clientelism and polarized voting: empirical evidence," Public Choice, Springer, vol. 141(3), pages 305-317, December.
    2. repec:aia:aiaswp:wp12 is not listed on IDEAS
    3. repec:eee:rujoec:v:1:y:2015:i:4:p:419-438 is not listed on IDEAS
    4. repec:eur:ejisjr:208 is not listed on IDEAS
    5. Bhattacharya, Utpal, 2003. "The optimal design of Ponzi schemes in finite economies," Journal of Financial Intermediation, Elsevier, vol. 12(1), pages 2-24, January.

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