Abstract
The goal of the construction of a Monetary Conditions Index (MCI) is to analyze both the interest rate channel and the exchange rate channel. The construction is based on standard open economy macroeconomic models. MCI is the weighted sum of the change in short-term interest rate and the exchange rate with the base period, with weights that are usually taken from empirical econometric models and that reflect the estimated impact of these variables to the product or to inflation. MCI change, gives in a single number the degree of narrowing or release (expansion) of monetary conditions. In this paper is proposed a MCI for Albania. Based in the calculations done by the author and after the comparison of this type of MCI with the type of MCI calculated from Bank of Albania, the author recommends to Bank of Albania the use of the MCI calculated in this paper. The reason of this recommendation is the more accurate description and explanation of monetary policy stance obtained from the use of MCI calculated in this paper.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
