Past Experiences and Current Mindset Reveal Crisis Mechanism and Financial Sustainability Insights: Evidences from Albania

Abstract

Periodic economic crises have been a well-recorded phenomenon in nations with capitalist economies since the first half of the 19th century. The effects and repercussions of the global financial crisis of 2007 were undoubtedly felt, even in a small nation like Albania. During the crisis, it became evident that traditional policies that stressed macroeconomic stability were insufficient and that bold action by central banks was necessary to offer flexibility in monetary policy regulations and ensure crisis recovery. This article provides a theoretical explanation of the crisis process as well as a discussion of the Bank of Albania's policy decisions made during two separate crises, the Global Financial Crisis and the Covid-19 Pandemic. In order to emphasize the most significant events and interpret the insights in each stage of the financial cycle, this article was undertaken from the perspective of comparison of various timelines. When looking at financial crises from a macroeconomics perspective, the descriptive method is used to analyse the evidence in a country like Albania. The findings of this study highlight the measures made by the Bank of Albania and the government to manage the economic crisis and strive to reduce its long-term repercussions. The purpose of the study is to provide macroeconomic indicator data on the Central Bank of Albania's response to the aforementioned crises in order to aid policymakers in reflecting on the direction of their policies during two separate periods of crisis.