The Stability of Money Supply in the View of Monetary Unification

Abstract

This study is focused on the effect of the money unification process of Albania and mainly in the effect of this process into the money supply. During the recent discussions about integrating our country into the European Monetary Union, a money illusion was conceived without taking into the consideration the rational effects of this process into the savers of the economy. Beyond this illusion— after analyzing the advantages and disadvantages of the unification process— this paper aims to look up into the main obstacles this process bears; for instance this article carefully observes the misalignment issue of inflation and exchange rate after the possible currency conversion in Albania. The main indicators on which our analysis is based are: money supply, interest rates, targeted inflation, GDP and velocity of money velocity. Further this paper aims to examine the relationship between money supply, GDP and targeted inflation. Based on this study we drive these following issues to a solution on the reference of Fisher’s Quantitative Theory of Money. Based on an empirical analysis, we expect to find a controversial behavior of money supply after the currency substitution. This research paper opens a new lieu of discussion in terms of academic and decision making debates.