Exchange Rate Analysis Up until 25 years ago

Exchange Rate Analysis
Up until 25 years ago, Albania adhered to a fixed exchange rate system. However, since the early 1990s the country shifted towards embracing a flexible exchange rate system. Another point that must be made is that legal provisions do allow the Bank of Albania to occasionally intervene in foreign exchange rates (via interest rates) in order to address temporary fluctuations and if possible increase the country’s reserves.
Without prejudice to the free exchange rate regime, the Bank of Albania may carry out operations in the foreign exchange market in order to adjust the exchange rate to the level determined by key macroeconomic factors, avoid disruptions and increase or decrease the foreign currency reserve.
It is important to point out that pursuant to strengthening the country’s exports and attracting FDI, Albania would benefit greatly from having a relatively depreciated currency relative to the USD and the EUR. If this were to be the case, then it would be cheaper for foreign capitals to invest in Albania, not to mention that exports would be significantly enhanced. Producers would have a greater incentive to pursue export opportunities, since selling their products in international markets would translate into higher levels of revenue and profit.
Labor Market
In 2007, the population of Albania was very slightly over 3 million people, and 10 years later (i.e. in 2017) it stood at 2.93 million people. This means that the country’s population has declined. With regards to the country’s labor force, it went from having a total of 1.25 million people to having a total of 1.33 million people over the same time period. This is explained by the fact that in spite of relatively high levels of migration out of Albania, the country’s age structure has rejuvenated. In fact, the country has the youngest population in Europe.