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Kosovo historical inflation trends and short-to-mid term pro

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Erza Mekuli

on 12 December 2013

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Transcript of Kosovo historical inflation trends and short-to-mid term pro

Kosovo historical inflation trends and short-to-mid term prospects

Erza Mekuli
Deniza Mulaj
Vanesa Ahmetxhekaj
Table of Contents:

Causes of Inflation
Views of Inflation
History of Inflation in Kosovo
The effects of unexpected inflation
Advantages and Disadvantages
Kosovo Inflation Rate
Budget Deficit of Kosovo
The Background of Kosovo Budget
Long term and mid-term prospects
The money supply
The Demand-Pull Effect
eference page:

Bertelsmann Stiftung’s Transformation Index. "Kosovo Country Report." N.p., 2012. Web. 10 Dec. 2013.

International Monetary Fund. "Republic of Kosovo: Request for Stand-By Arrangement—Staff Report; Press Release on the Executive Board Discussion." N.p., Apr. 2012. Web. 10 Dec. 2013.

Manager. "Kosova Budgetary Sustainability and Fiscal Policy." N.p., 2007. Web. 10 Dec. 2013.

Ministria E Financave. "Korniza Afatmesme E Shpenzimeve 2014-2016." N.p., Apr. 2013. Web. 10 Dec. 2013.

USAID. "Kosovo Economic Performance Assessment." N.p., May 2008. Web. 10 Dec. 2013.

S, Pat. "What Is Inflation Definition – Causes of Inflation Rate and How to Fight the Effects." N.p., n.d. Web. 10 Dec. 2013.

Tamny, John. "Monetarism and Keynesianism: Identical Sides of the Same Adolescent Coin." N.p., Sept. 2013. Web. 10 Dec. 2013.

Cost-push Effect
Views on Inflation:
Monetarist View
Keynesian View
Feel free to ask any question!
Brief history of Inflation in Kosovo:

Inflation-macroeconomic stability
Centrally planned economy-market based economy
Inflation throughout the years 2003-2013
History (cont')
-2008 Independence:
a) no public debt
b) sustainable social security system
c) primary surpluses
d) sizable cash buffers
-2010 Stand-by arrangement;
-2011 Staff-monitored program;
-2012 Consumer price inflation equals 0.6%;
-Predictions 2014-2016:
Oil decreased by -0.1% (2014-15)
Food (globally) decreased by -3.9% (2013)
Food and oil increased by 14.5% and 18.7% (2015-16)
-Inflation will stabilize and domestic prices will be around 1.3% higher than 2013. In 2015 inflation will be around 1.5% and 2016 around 2.1%.

Effects of unexpected Inflation
-Inflation redistributes Income
some people win- the ones getting higher prices (oil/gases companies)
some people lose-the ones paying the higher prices
Advantages and Disadvantages
Debtors win
-Borrowers pay back loans with inflated dollars (dollars that are worth less)
Creditors lose
-Lenders are paid back with inflated dollars (dollars that are worth less)
Kosovo Inflation Rate
The Republic of Kosovo also offers a stable macroeconomic environment by its adoption of the Euro as its official currency
The use of Euro in Kosovo has resulted in low inflation rate and in the elimination of exchange rate risks and monetary policy risks.
The inflation rate measures a broad rise or fall in prices that consumers pay for a standard basket of goods
Kosovo's tie to the euro has helped keep core inflation low. Kosovo maintained a budget surplus until 2011, when government expenditures climbed sharply

Kosovo Inflation Rate (cont')
Inflation in Kosovo did not disappear immediately following introduction of the Deutsche Mark, and subsequently Euro
In 2000-2001, Kosovo recorded double-digit inflation, fueled by massive foreign aid and private inflows
Later, inflation declared sharply and is now below the average Euro zone inflation
Other factors which are affecting inflation in Kosovo are:
-high unemployement
- low economic activity
Budget Deficit Of Kosovo (cont')
Kosovo's unilateral adoption of the Euro places a premium not only in fiscal discipline, but also on labor market flexibility, wage restraint, and structural reforms that enhance the economy's competitiveness
The adoption of Euro as a currency enabled a stable inflation rate
With no monetary policy, fiscal policy is the main tool to safeguard macroeconomic stability. A sound policy stance would be complemented with appropriate structural fiscal reforms, as well as steps to enhance the financial system's resilience
The Background of Kosovo Budget
The Budget Deficit of Kosovo
What is budget deficit?
What is meant to be in deficit?
Kosovo Budget Deficit (cont')
The Budget of Kosovo (cont')
Full transcript