Impact In The Economic Growth In Albania Economics Essay

1. Introduction

Based to the free encyclopaedia, fiscal development is defined as a procedure affecting the interaction of many activities and establishments to better the quality, measure and efficiency of fiscal intermediation and economic growing is a term used to bespeak the addition of per capita gross domestic merchandise ( GDP ) or other step of aggregative income. It is frequently measured as the rate of alteration in GDP. What is of import to economic growing is the measure of goods and services produced.

This stuff tries to analyze the construct of the fiscal development, its large impact in the economic growing and all the chief factors that affect this impact in general and besides in the instance of Albania.The economic system of a state is based in some chief elements and one of them is the fiscal development. Financial development has been and still is one of the most of import factors in the economic growing which is deciding for the development of a state. This survey is about the fiscal development during the old ages 1996-2007, because Albania was in democracy stableness after a long passage

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This stuff is organized as follows: in the 2nd sectionA there is a sum-up of the literature about fiscal development depicting its impact in the economic growing. In the 3rd subdivision we will show the development of fiscal systemA and economic growing in Albania, in the subdivision 3.1 we will see the fiscal development in Albania during the old ages, in 3.2 we will analise the chief indexs that influence in the fiscal development. In the terminal of this stuff, in the 4th the subdivision there will be the conlusions.

2. Theory

“ As the theoretical accounts are simplification of the world, no theoretic theoretical account can explicate the being of the fiscal development. ”

( Khan and Senhadji, 2000 )

Financial development as an component with an of import function in the economic system of a state has caused many debates.We sometimes ask ourselves about why our contry is non every bit developed as others, for illustration Germany.This is non merely our inquiry, but of many economic experts. Literature suggests that there is a reasonably big figure of factorsA that explains differences among states. One of the most of import factors, is fiscal development and his impact in the economic growing and there is a positive nexus between them.

There are two possible links between fiscal developmentA and economic growing which were discivered by Patrick in 1966.On one manus there is the first nexus called “ demand following ” .This shows that the demand for fiscal services depends on economic growing, marketability and modernisation of economic sectors. A Therefore, settingA fiscal establishments, their fiscal assets and liabilities comesA as a consequence of increased demand from investors in the existent economy.What the fastest is the growing of existent incomeA economic system, the greater will be the demand for financess from enterprises.A This happens when houses in many different situationsA , will be less able to finance this interior enlargement.

On the other manus there is the 2nd nexus that is called theA “ supply taking ” .A This nexus includes the transportation of resources from sectors with low growing to those of high growing, promoting and back uping growth.A This means that the creative activity of fiscal institutionsA and their services, happens before the demand for them andA is their development that stimulates economic growth.Savings affects straight non merely the levelA balance of income, but besides economic growing.Thus, fiscal marketsA have a powerful consequence on the existent economic activity.A New theories of fiscal and economic growing assume that fiscal developmentA leads to economic growth.The public presentation of fiscal marketsA is really of import for economic growth.However, it seems that the argument of who leads the other, between economic growthA and fiscal development is still open.This double nexus between economic growing and fiscal development, is the chief motivation of this paper.A

There is another of import point to analyze: the definition of indexs, which measure fiscal development. Five are the chief indexs that we will analyze in this stuff. They are: wide money as rate to income, the rate of entire sedimentations of the banking system ‘s income, the rate of private recognition to income, the rate of private recognition to entire recognition and the rate of domestic recognition to income.

One of the indexs that measures fiscal development is wide money as the rate on income, which measures the degree of hard currency economy.A This index shows the existent graduated table of the fiscal sector in an economic system, where money serves as a mean of payment and salvaging tool.A Money tight reflects better the map as a mean of payment, and wide money that as a mean of salvaging. In some instances, money tight, is non classified as a good index of fiscal development.

Another index, which measures the quality of the fiscal development, is the rate of entire sedimentations of the banking system to income.A In some states, a big portion of odds and endss money, is outside the banking system.A Thus, in order to acquire a better representative of fiscal development, money in circulation must be excluded from wide money.A In this instance, the rate of banking sedimentations to income seems to be like fiscal development.

The 3rd index is the rate of domestic recognition to income ( Odedokun, 1989 ) . This index represents the fiscal system assets, which are indexs that have greater weight in the fiscal system balance and impact really much on it.

In order to be a direct index in the fiscal intercession, recognition given to the private sector serves as the 4th index development. The private sector recognition generates a greater investing and productiveness, than the public sector recognition.

The 5th index is the weight that occupies the private sector recognition to the interior sum credit.A The weight that occupies recognition given to the private sector to entire domestic recognition represents another facet of the fiscal system that is another index of his development.

Domestic recognition – represents the entire charge of the economic system from Bankss that accept sedimentations. The information belong to the period 1996-2007.Source: Bank of Albania.

Private sector recognition – represents the entire claims of the Bankss that accept sedimentations from endeavors and people. The information belong to the period 1996-2007.Source: Bank of Albania.

Entire sedimentations -represents the sum of sedimentations of the system of the Bankss. The information belong to the period 1996-2007.Source: Bank of Albania.


As we analised the fiscal development in general now we will see it in Albania.We will analyze what has happened with the fiscal development in our state during the old ages and will analise the chief indexs of the fiscal development from 1999 to 2007 by charting and construing it.

3.1 The fiscal development during the old ages

We will get down this research before the twelvemonth 1990.In this period we was non borned so we didnt know anything, but from the researches we learned that the banking sector and the economic system were both centralized.A The banking system was one degree and included: State Bank ( pecuniary authorization and recognition of the economic system ) , Directory General of the umbrella trade name of Savingss and Security ( functioning as depositor ofA public nest eggs and belongings insurance ) and Agricultural Bank ( insurance company of the supply for support to the agricultural sector ) .

Than, after the autumn of the Communist system in the early 1990s, Albania entered in aA transitional period, which was accompanied by some societal changes.A Most of the co-ops and province endeavors wereA privatized making little household concern focusedA chiefly in the market of goods. While, the fiscal development was non excessively much nowadays.

In the twelvemonth 1992 the banking system as portion of the fiscal system had an really of import alteration through the blessing of Torahs “ On the Bank of Albania ” A and “ The banking system in Albania ” .A This alteration madeA possible the two-level system of fiscal construction and put the A institutional and legal footing for a banking system based on the A free enterprise and the market structure.A

Until the stoping of 1996 were licensed five Bankss, two ofA which had Greek capital, one owned to the authorities of KosovoA and the others two Albanian Government Joint Ventures with an Italian andA Arab bank.Despite these developments, the system continued to endure fromA lacks inherited from the old government, as on the legal model, as on the regulator. Gradual accretion of manyA jobs, allowed the creationA and the quickly increasing in this informal construction, which was obvious inA 1997.

Some old ages subsequently, after the pyramid crisis in 1997, which touched the economic and societal side in our contry, the fiscal system went into another stage of A its development.A Presently, our fiscal system consists of 16 Bankss, seven fiscal establishments and 10 insurance companies.Albanian-owned private Bankss, are non legion, but they are characterized by fast growing rate.A A

3.2 The chief indexs of the growing 1999-2007

To demo the advancement of the fiscal development there are some chief indexs that have changed with the passing of the old ages from 1999 to 2007.Table1 nowadayss some of the chief indexs:

Table 1.The chief indexs,1999-2007










Number of Bankss








































Beginning: Bank of Albania

In this tabular array we have shown 4 indexs that affect the fiscal development.If they increase it means that the state has a better fiscal development.We have analised these indexs in the period 1999-2007.As we can see from 1999-2001 the figure of the Bankss has non changed because in these old ages our state was in passage and was hapless, than from 2002-2005 it has increased in each twelvemonth with one bank. Finally from 2005-2007 there is no change.In regard of the 2nd index we see that from the old ages 1999-2004 there has happend some little alterations, while in 2005 there is a large growing, every bit good as in 2006-2007, this because in these old ages our state was in stableness and had the possibility to develope the economic sector.We can state the same thing for the last two indicators.In general, in all sectors Albania was in better conditions get downing from the twelvemonth 2005.

If we take a expression on the advancement of Albanian economic growing, we observe that in the recent old ages it fluctuates around 6 % degree. However poorness is reduced, once more a fifth of the population lives in poorness and about 3 % of the population is populating ekstreme in poorness. If we make a comparision of Albanian economic system with other states we will observe that the rate of growing of existent GDP in our state fluctuates in the same value with other states of the part.


In the every-day life we do n’t normally advert the fiscal development and many of us do n’t cognize what it is. So in this stuff, foremost we tried to give the construct of the fiscal development. After this we did a theoretical overview which focused on the designation of the double connexion between fiscal development and economic growing during the period 1996-2007, explicating the impact on each-other.

We presented the instance of Albania and the chief indexs that influenced the fiscal development. We besides saw the tabular array of these indexs and tried to explicate them. We have reached to the decision that public presentation and development of fiscal intermediation plays an of import function in the economic activity in all states, besides in Albania.

However, is to state that the above theoretical account has some restrictions. First, the figure of old ages that we have chosen is little and 2nd, we do n’t hold the informations for the old ages after 2007.


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