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Europe > Albania

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Cover IMF Working Papers
Fiscal Policy and Labor Market Outcomes in Europe: Are the Balkans Different?
Serhan Cevik
and
Maja Ivanovic
The macroeconomic effects of fiscal policy are central to both research and policymaking, yet relatively little is known about how fiscal shocks impact men and women differently across diverse labor market and institutional contexts. This paper provides the first comparative analysis of gender-specific responses to exogenous fiscal shocks in the Balkans relative to the rest of Europe. Using a cross-country panel dataset and the local projection method, we trace the dynamic effects of fiscal expansions and contractions on labor force participation, employment, and wage outcomes. The results reveal substantial regional variation and pronounced gender asymmetries. Expansionary fiscal shocks lead to modest and delayed improvements in female labor market outcomes in the Balkans, whereas effects in other European countries are stronger and more immediate. Conversely, contractionary shocks disproportionately reduce female employment, especially during downturns, with greater volatility observed in Balkan economies. These patterns reflect differences in sectoral employment composition, care infrastructure, and public service provision. Overall, the findings suggest that fiscal policy operates within structurally gendered labor markets, highlighting important implications for macroeconomic stabilization and labor market resilience in transitional economies.
Keywords:
Fiscal policy; gender; labor-market outcomes; Balkans; Europe; IMF working papers; labor-market outcome; labor market resilience; labor market outcomes in Europe; gender asymmetry; Labor markets; Employment; Women; Labor force; Labor force participation; Global
Cover Selected Issues Papers
A Building Block Approach for Introducing a Positive Neutral Countercyclical Capital Buffer in Albania
Maximilian Fandl
,
Giorgia De Nora
, and
Eugena Topi
The paper discusses the introduction of a positive neutral countercyclical capital buffer (CCyB) for Albania. The building blocks present a step-by-step guide to assess preconditions to be in place. Applied to the case of Albania, authors employ a set of methods for the calibration of a positive neutral rate, including a quantile local projection and stress-test based approach. The paper (i) finds a positive neutral CCyB regime is feasible and net beneficial for Albania, (ii) identifies the adequate range of the positive neutral rate between 100-200bps, and (iii) provides a template for emerging markets to explore positive neutral CCyB regimes.
Keywords:
macroprudential policy; countercyclical capital buffer; releasable capital buffer; local projection; stress test; IMF staff; IMF country; issues paper; building block approach; Countercyclical capital buffers; Bank soundness; Capital adequacy requirements; Commercial banks; Stress testing; Systemic risk; Europe
Cover IMF Staff Country Reports
Albania: Selected Issues
International Monetary Fund. European Dept.
This Selected Issues paper analyzes a building block approach for introducing a positive neutral countercyclical capital buffer (CCyB) in Albania. While Albania has advanced its macroprudential policies, the current regulatory framework includes limited releasable buffers. Introducing a positive neutral CCyB regime would be an important milestone in the development of Albania’s macroprudential toolkit. It would strengthen the Bank of Albania’s ability to react to stress episodes and improve the usability of capital buffers without unduly restricting bank credit provision, while maintaining a higher CCyB through the cycle compared to the existing buffer regime. While high bank profitability could support a fully capital-accretive transition to a positive neutral rate, there are some merits to a partially capital-accretive or a capital-neutral introduction in the Albanian context. The calibration of the positive neutral rate could be based on a suite of backward- and forward-looking methods, combined with expert judgement.
Keywords:
CCyB regime; staff team; CCyB calibration; IMF country; calibration method; Europe
Cover IMF Staff Country Reports
Albania: 2025 Article IV Consultation-Press Release; and Staff Report
International Monetary Fund. European Dept.
The 2025 Article IV Consultation discusses that Albania enjoys one of the highest growth rates in Europe, low inflation, declining public debt, and strong foreign reserves. Building on this foundation, the Albanian government is advancing bold reforms to secure EU membership by 2030. Growth is projected to remain robust at 3.5 percent in 2025 and 3.6 percent in 26, while risks to the outlook have shifted to the downside amid a more unsettled external environment. Timely domestic reforms are essential to safeguarding macroeconomic stability and closing reform gaps with the EU. Key to this will be preserving fiscal buffers through sustained revenue mobilization, maintaining price and financial stability through agile monetary policy and further refinement of prudential tools, and advancing comprehensive reforms in human capital, labor markets, and governance. Comprehensive reforms in labor markets, human capital and governance will be needed to revive productivity, against the backdrop of high emigration, youth unemployment, and informality. While Albania has made significant strides in enacting legal reforms, including in anti-corruption legislation, it continues to face obstacles in ensuring effective preventive measures, institutional transparency, and independent oversight.
Keywords:
fund relation; Dissemination Standards Bulletin Board; Imf executive board; exchange rate arrangement; Bank of Albania; Global; Europe
Cover IMF Working Papers
Monetary Policy Transmission in Euroized Countries: Evidence from Emerging Europe
Wentong Chen
,
Fazurin Jamaludin
,
Florian Misch
,
Alex Pienkowski
,
Mengxue Wang
, and
Zeju Zhu
This paper studies domestic monetary policy transmission in European countries with a significant share of lending and deposits in foreign currency, referred to as ‘euroized economies’. We find that the impact of domestic monetary policy shocks on both inflation and GDP diminishes with the degree of euroization across countries: the effects are twice as high in non-euroized countries compared to countries in our sample with the highest level of euroization. We further examine the exchange rate, credit and interest rate transmission channels, which are typically less effective in euroized economies. We show that domestic monetary policy has at best limited effects on the exchange rate. In addition, during the post-pandemic monetary tightening episodes, an increase in foreign-currency loans often softened the decline in overall credit growth, and rates of foreign-currency loans have followed the ECB policy rate rather than the domestic ones. By contrast, our analysis suggests that the pass-through to interest rates of domestic currency loans is similar across countries with different levels of euroization.
Keywords:
Monetary policy transmission; Euroization; Emerging markets; interest rate transmission channels; monetary policy shock; domestic monetary policy; foreign-currency loan; Central bank policy rate; Exchange rates; Loans; Currencies; Mortgages; Europe
Cover IMF Staff Country Reports
Republic of North Macedonia: Selected Issues
International Monetary Fund. European Dept.
This Selected Issues paper examines the expected costs of the population decline on potential output growth in New Macedonia. The IMF estimates that the population decline would create a drag on output growth of around 0.5 percentage points. Increased emigration, potentially driven by further EU integration, presents a downside risk to outlook as it could further worsen population dynamics. In order to study the impact of further EU integration, the paper employs a structural model of the European labor market with migration. Negative impacts of further EU integration from increased emigration can be offset by increasing productivity. The paper also shows that productivity-increasing structural reforms, active labor market policies, new business support, and labor participation support can all boost potential output, helping to offset some of the negative impact of migration. Policies can bolster the labor market and be a catalyst for economic growth. The analysis highlights large structural barriers in the productivity of workers, the matching efficiency between workers and firms, and the cost of creating new vacancies in North Macedonia compared to European countries.
Keywords:
EU integration; modeling labor markets; policy scenario; labor market integration; Policy discussion; Labor markets; Spillovers; Potential output; Energy prices; Global; Northern Europe
Cover Selected Issues Papers
Foreign Exchange Intervention Through the Lens of the Quantitative Integrated Policy Framework: The Case of Albania
David Bartolini
,
Jakree Koosakul
,
Rebecca Huang
,
Jesper L Linde
, and
Roland Meeks
In recent years, Albania has experienced a sustained appreciation of the domestic currency. This raises the questions of what factors are driving this appreciation and how to calibrate appropriate policy responses. Drawing on insights provided by the IMF’s integrated policy framework (IPF), this paper examines the case for foreign exchange intervention (FXI) in Albania by estimating an IPF model to quantitatively illustrate relevant policy tradeoffs. While the estimation results confirm the shallow nature of the local FX markets, the appreciation of the lek is found to have been primarily driven by fundamental factors, making conventional interest rate policy an appropriate policy tool. Nevertheless, in certain circumstances where the fundamental lek appreciation is likely to be compounded by non-fundamental shocks, including shifts in foreign investor risk appetite, FXI can serve as an effective complementary tool in alleviating output-inflation tradeoffs.
Keywords:
Albania; integrated policy framework; exchange rates; capital flows; tourism; foreign exchange markets; market liquidity; foreign exchange intervention; monetary policy; case of Albania; output-inflation tradeoff; lek appreciation; IPF model; exchange rate volatility; Currency markets; Real exchange rates
Cover Selected Issues Papers
Stress Testing the Albanian Banking Sector: A Decade Post-FSAP
Jakree Koosakul
and
Eugena Topi
Over the past decade, the Albanian banking sector has undergone a remarkable transformation amid strong macroeconomic performance and sound financial reforms. Nevertheless, pockets of vulnerability remain, including some that were identified during the IMF’s 2014 Financial Sector Assessment Program (FSAP). To assess the resilience of the Albanian banking sector, this paper conducts capital adequacy and liquidity stress testing exercises using supervisory bank-level data. The results indicate banks’ broad resilience to shocks arising from non-performing loans and interest rates. On the other hand, vulnerabilities owing to large-borrower and sovereign exposures are found to be material in some cases. Relatedly, while banks are found to have adequate high-quality liquid assets under liquidity stress scenarios, such resilience hinges importantly on their access to the Bank of Albania’s liquidity facility. Such results call for further strengthening of the macroprudential toolkit and continued efforts to deepen financial markets.
Keywords:
Albania; banking sector; stress testing; capital adequacy; liquidity; large exposure; sovereign-bank nexus; Albanian banking sector; Eugena topi; resilience hinge; Bank of Albania's liquidity facility; LCR value; Commercial banks; Liquidity requirements; Capital adequacy requirements; Global
Cover IMF Staff Country Reports
Albania: Selected Issues
International Monetary Fund. European Dept.
This Selected Issues paper examines the case for foreign exchange intervention (FXI) in the context of Albania by estimating an integrated policy framework (IPF) model to quantitatively illustrate relevant policy trade-offs. A version of the quantitative IPF (QIPF) model is estimated for Albania, with the aim to examine the merits of FXI in response to shocks amid shallow FX markets. Two specific types of shocks are considered, namely: (1) a fundamental shock in the form of a tourism boom, and (2) a nonfundamental shock in the form of exogenous portfolio inflows caused by a risk-on episode. Exchange rate volatility driven by nonfundamental factors may present policymakers with a trade-off between stabilization objectives. Adverse impacts from risk shocks can be addressed using FXI. A better tool to address temporary inefficient capital flow shocks is a sterilized FX intervention, provided that markets are sufficiently shallow and an appropriate buffer of reserves is available. Consideration should be given to letting the exchange rate adjust more flexibly and relying on interest rate policy as the primary tool for price stability. In cases of nonfundamental shocks, the scenario analysis suggests that interventions could be beneficial by lowering output and inflation volatility. In doing so, however, the authorities should internalize the potential adverse consequences of FXI, including on risks to the central bank balance sheet, interest rate transmission, and financial market development.
Keywords:
risk result; market liquidity; Albanian banking sector; banks' liquidity resilience; LCR value; Currency markets; Exchange rates; Commercial banks; Liquidity requirements; Capital adequacy requirements; Global
Cover IMF Staff Country Reports
Albania: 2024 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Albania
International Monetary Fund. European Dept.
The 2024 Article IV Consultation discusses that the Albanian economy has turned in a strong performance in recent years, underpinned by prudent macroeconomic policies. Output is now well above its prepandemic trend thanks to a booming tourism sector. Prudent fiscal policies contributed to a remarkable reduction in public debt while proactive monetary policy, falling global commodity prices, and lek appreciation have facilitated disinflation. External imbalances have shrunk considerably. Systemic vulnerabilities in the financial system appear broadly contained. The banking sector remains well-capitalized and liquid with average prudential ratios well above regulatory requirements. The hard-earned gains on macroeconomic stability should be safeguarded, while deep structural reforms are needed to accelerate convergence. The groundwork for the introduction of a new property tax law—including the establishment of a fiscal cadaster—should be completed in a timely manner. Policies should focus on raising productivity by fostering integration in global value chains, removing barriers to firm growth such as distortionary tax incentives and hurdles to bank lending, promoting technology adoption and improving education and training.
Keywords:
EU convergence criteria; EU accession discussion; EU accession; Youth Guarantee program; EU standard; Exchange rates; Europe; Global