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The Albanian Economy in Transition: The Role of Remittances and Pyramid Investment Schemes


  • James Korovilas


The Albanian economy in the 1990s experienced a rapid recovery from its near-collapse in 1992. The rapid economic growth between 1993 and 1996 was exceptional by East European standards, and represented the highest rate of sustained economic growth of all transition economies. This investigation indicates that the standard explanations for recovery and growth in transition economies, such as the pace of economic reform or the levels of domestic and foreign investment, do not adequately explain the rapid growth of the Albanian economy. Factors specific to Albania also need to be considered. The main conclusion drawn here is that the success of the Albanian economy in the mid-1990s rested largely upon the inflow of remittances from Albanians working abroad. These remittances are shown to have been much greater in value than was previously assumed by the IMF: in the region of $700 million per annum rather than $400 million. Remittances are also found to have played a much greater role in Albania's economic recovery than was previously recognised. It is demonstrated that the rise of pyramid investment schemes in 1996 was closely linked to the inflow of remittances. Such schemes are also found to have played a part in fuelling the rapid economic growth in the Albanian economy, before their collapse in 1997.

Suggested Citation

  • James Korovilas, 1999. "The Albanian Economy in Transition: The Role of Remittances and Pyramid Investment Schemes," Post-Communist Economies, Taylor & Francis Journals, vol. 11(3), pages 399-415.
  • Handle: RePEc:taf:pocoec:v:11:y:1999:i:3:p:399-415 DOI: 10.1080/14631379995940

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    References listed on IDEAS

    1. Iraj Hashi & Lindita Xhillari, 1999. "Privatisation and Transition in Albania," Post-Communist Economies, Taylor & Francis Journals, vol. 11(1), pages 99-125.
    2. Ahmet Mancellari & Harry Papapanagos & Peter Sanfey, 1996. "Job creation and temporary emigration: the Albanian experience," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 4(2), pages 471-490, October.
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    Cited by:

    1. Mico Apostolov & Dusko Josevski, 2016. "Aggregate Demand–Inflation Adjustment Model Applied to Southeast European Economies," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 5(1), pages 141-157.
    2. Robert Shelburne & Jose Palacin, 2007. "Remittances in the CIS: Their Economic Implications and a New Estimation Procedure," ECE Discussion Papers Series 2007_5, UNECE.
    3. Hermine De Soto & Peter Gordon & Ilir Gedeshi & Zamira Sinoimeri, 2002. "Poverty in Albania : A Qualitative Assessment," World Bank Publications, The World Bank, number 15234.
    4. Laetitia Duval & Francois-Charles Wolff, 2010. "Remittances matter: longitudinal evidence from Albania," Post-Communist Economies, Taylor & Francis Journals, vol. 22(1), pages 73-97.
    5. Kuckulenz, Anja & Buch, Claudia M., 2004. "Worker Remittances and Capital Flows to Developing Countries," ZEW Discussion Papers 04-31, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    6. Sergei Guriev & Barry W. Ickes, 2000. "Microeconomic Aspects of Economic Growth in Eastern Europe and the Former Soviet Union, 1950-2000," William Davidson Institute Working Papers Series 348, William Davidson Institute at the University of Michigan.
    7. Robert Shelburne & Jose Palacin, 2008. "Remittance Flows in the Transition Economies: Levels, Trends, and Determinants," ECE Discussion Papers Series 2008_5, UNECE.
    8. Lisa Arrehag & Orjan Sjoberg & Mirja Sjoblom, 2005. "Cross-border Migration and Remittances in a post-communist society: Return flows of money and goods in the Korce district, Albania," South-Eastern Europe Journal of Economics, Association of Economic Universities of South and Eastern Europe and the Black Sea Region, vol. 3(1), pages 9-40.
    9. Christos Nikas & Student Anastasia Blouchoutzi, 2014. "Emigrants’ Remittances and the “Dutch Disease” in Small Transition Economies: the Case Of Albania and Moldova," Romanian Statistical Review, Romanian Statistical Review, vol. 62(1), pages 45-65, March.
    10. James Korovilas, 2002. "The Economic Sustainability of Post-conflict Kosovo," Post-Communist Economies, Taylor & Francis Journals, vol. 14(1), pages 109-121.
    11. Buch, Claudia M. & Kuckulenz, Anja & Le Manchec, Marie-Helene, 2002. "Worker Remittances and Capital Flows," Kiel Working Papers 1130, Kiel Institute for the World Economy (IfW).
    12. Hermine De Soto & Peter Gordon & Ilir Gedeshi & Zamira Sinoimeri, 2001. "A Qualitative Assessment of Poverty in Ten Areas of Albania," World Bank Other Operational Studies 15455, The World Bank.

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