The Level of Euroization of Albanian Economy

Abstract

The use of foreign currency is a widespread phenomenon in all post-communist countries of Eastern Europe including here Albania. Relatively long transition caused the loss of trust of individuals in local currency and also in domestic monetary regime. Foreign currency is perceived as a kind of "protection" from the uncertainties caused by macroeconomic instability that characterizes in general countries that pass from a totalitarian regime to a free open market regime. The realities of these transition years have indicated an increasing preference on the use of strong European currency, which, to a certain extent, has led to a partial euroization of the economy. The predominant opinion, in academic and political circuit, is that the advantages of Euroization, at least for a short period of time are profoundly evident especially in developing countries where the aspiration on EU accession is great. When we analyze euroization as a phenomenon, except for the advantages, we have to examine in detail even the other side of the coin, its costs on the economy and monetary system of a country. Since the beginning of the global crises the amount of deposits in foreign currency, mainly euro, compared to the total amount of deposits has increased. How does the euroization affect the Albanian economy? There are three types of euroization and each has its own relevant measure. First of all there is the euroization of assets of the economy, which is measured by the ratio of foreign currency deposits to local currency deposits . Secondly there is the euroization of the liabilities of an economy, which is measured by the ratio of loans in foreign currency to loans in local currency. Thirdly, there is the euroization of transactions, which is measured by the degree of currency transactions against local currency transactions.

DOI: 10.5901/ajis.2015.v4n1s2p231