Inflation and Money Demand in Albania

The paper uses a simple analytical framework to estimate relationships between prices, money the exchange rate, and interest rates in Albania during 1993–97. The estimated parsimonious error correction model extends the findings of a growing literature on inflation and money demand in transition economies. The results suggest that, after the one-time effects of the 1997 crisis are taken into account, the long-run determinants of inflation and money demand remained unchanged. Strong financial policies since mid—1997 appear to have helped to restore conditions for low inflation and stable money demand.

Inflation and Growth in Transition

This paper examines the progress made in four Asian transition economies—China, Lao P.D.R., Vietnam, and Mongolia—to market-based systems. Overall, these economies appear to have had a more favorable experience with inflation stabilization and output growth than that of transition economies elsewhere. While initial conditions played an important role in determining the strategy and speed of the transition, growth performance benefited from continued macroeconomic stability and reforms in a key sector (such as agriculture); this confirms the need for sustained and rapid structural reforms and highlights the constraints for sustainable growth posed by weak financial and enterprise sectors.