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

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  • James Korovilas

Abstract

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.

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  • 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

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    1. World Bank, 1996. "World Development Report 1996," World Bank Publications - Books, The World Bank Group, number 5979.
    2. Mario I. Blejer & Fabrizio Coricelli, 1995. "The Making Of Economic Reform In Eastern Europe," Books, Edward Elgar Publishing, number 72.
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    Cited by:

    1. 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.
    2. 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.
    3. Grogan, Louise, 2018. "Strategic Fertility Behaviour, Early Childhood Human Capital Investments and Gender Roles in Albania," IZA Discussion Papers 11937, Institute of Labor Economics (IZA).
    4. Brian Roberts & Malgorzata Markiewitz & Marjan Nikolov & Aleksandar Stojkov, 2008. "A Study On Determinants And Trends In Remittance Flows In Macedonia," Journal Articles, Center For Economic Analyses, pages 41-61, June.
    5. Laetitia Duval & Francois-Charles Wolff, 2010. "Remittances matter: longitudinal evidence from Albania," Post-Communist Economies, Taylor & Francis Journals, vol. 22(1), pages 73-97.
    6. Iris Polyzou & Stavros Nikiforos Spyrellis, 2024. "Housing Practices of Albanian Immigrants in Athens: An “in-between” Socio-Spatial Condition," Land, MDPI, vol. 13(7), pages 1-24, July.
    7. Robert Shelburne & Jose Palacin, 2007. "Remittances in the CIS: Their Economic Implications and a New Estimation Procedure," ECE Discussion Papers Series 2007_5, UNECE.
    8. Hermine De Soto & Peter Gordon & Ilir Gedeshi & Zamira Sinoimeri, 2002. "Poverty in Albania : A Qualitative Assessment," World Bank Publications - Books, The World Bank Group, number 15234.
    9. James Korovilas, 2002. "The Economic Sustainability of Post-conflict Kosovo," Post-Communist Economies, Taylor & Francis Journals, vol. 14(1), pages 109-121.
    10. Çaro, Erka & van Wissen, L.J.G., 2007. "Migration in the Albania of the post-1990s: triggered by post-communist transformations and facilitator of socio-demographic changes," SEER Journal for Labour and Social Affairs in Eastern Europe, Nomos Verlagsgesellschaft mbH & Co. KG, vol. 10(3), pages 87-105.
    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 Kiel).
    12. Hermine De Soto & Peter Gordon & Ilir Gedeshi & Zamira Sinoimeri, 2001. "A Qualitative Assessment of Poverty in Ten Areas of Albania," World Bank Publications - Reports 15455, The World Bank Group.
    13. Kuckulenz, Anja & Buch, Claudia M., 2004. "Worker Remittances and Capital Flows to Developing Countries," ZEW Discussion Papers 04-31, ZEW - Leibniz Centre for European Economic Research.
    14. 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.
    15. Robert Shelburne & Jose Palacin, 2008. "Remittance Flows in the Transition Economies: Levels, Trends, and Determinants," ECE Discussion Papers Series 2008_5, UNECE.
    16. Braha, K. & Qineti, A. & Cupák, A. & Lazorčáková, E., 2017. "Determinants of Albanian Agricultural Export: The Gravity Model Approach," AGRIS on-line Papers in Economics and Informatics, Czech University of Life Sciences Prague, Faculty of Economics and Management, vol. 9(2), June.
    17. 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.
    18. Mathias Lerch, 2013. "Fertility Decline During Albania’s Societal Crisis and its Subsequent Consolidation," European Journal of Population, Springer;European Association for Population Studies, vol. 29(2), pages 195-220, May.

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