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The persistence of inflation in Albania

 

Vasilika Kota

Bank of Albania

 

 

 

ABSTRACT

The objective of this paper is to estimate inflation persistence in Albania for the period 1993 to 2008. We apply the univariate approach with constant and time varying mean of inflation for headline and core inflation, and also test whether there are structural changes of persistence. The empirical results suggest that persistence of headline inflation was somehow higher during the inflationary periods while it started to decline after 1997, when inflationary expectations seem to have been stabilized. Therefore, monetary policy appears to be effective at reducing inflation. Empirical results for core inflation suggest that there is no structural break of persistence, which is relatively higher than persistence of headline inflation.

 

 

Keywords: inflation, persistence, Albania, univariate approach

JEL classification: E31, E37

 

Acknowledgements: I would like to acknowledge helpful discussions with Heather Gibson, Sophia Lazaretou and Armela Mancellari. The views expressed in this paper are those of the author and do not necessarily reflect those of the Bank of Albania and the Bank of Greece. I alone am responsible for the remaining error and omissions.

 

 

 

 

Correspondence:

Vasilika Kota

Research Department

Sheshi Skënderbej, No. 1

Tiranë, Albania

Tel: +355 4 2222 152 ext. 4080

Fax: +355 4 2223 558

E-mail: vkota@bankofalbania.org

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