The Challenges of Changing Monetary Policy Setup. What Should Concern the Bank of Albania?

or reflect the views of the Bank of Albania During the last 3 and half years Bank of Albania has produced a vast literature on the characteristics of Albanian monetary policy, its transmission mechanism and possible future developments. The center of this research is the new setup of monetary policy as the Bank of Albania prepares to depart from its current regime of monetary targeting and most probably adopt an inflation targeting regime. While the shift implied by such terminology involves substantial change in the model and implementation of monetary policy, in practice this is less so. Broadly speaking, the operational procedures and the decision making process of the current policy are not different from implicit inflation targeting regime. This paper will not appraise or justify the reasons which motivate such change, but will discuss several important challenges that monetary policy might face in this new phase and suggest possible solutions when possible. This material builds upon existing empirical literature and uses it to identify potential challenges to monetary policy