Inflation, its Dynamics, and its Possible Causes in Albania

Abstract: This paper attempts to analyze the causes of the inflationary developments in Albania in the years 1994-1997 with the help of econometric methods. We consider monetary and fiscal expansion, imported inflation, and direct demand pull as possible causes. Except for significant effects of direct demand pull and of exchange rate devaluation, the statistical results give only moderate support to the classical economic causes. Seen this way, Albanian inflation appears to be mainly determined by its own expectations and by singular political events.;