Foreign exchange rates and their connection to macroeconomic indicators in Albania

Foreign exchange rates are an important indicator of a country’s economy. They can serve to signal economic crises or even prevent them if the adopted regime allows their fluctuation to stay within the boundaries of a given countryThere are many theories on exchange rate regimes and qualitative analysis is not sufficient to solve all the problematics.
Many econometric and statistical models used to define exchange rates, include an important effect of monetary policy defined in terms of monetary aggregates on exchange rates: a faster rate of monetary expansion in a country against a stable money demand may depreciate the nominal exchange rate and vice versa. One of the problems encountered in empirical analysis and in random empiricism arises from the fact that the exchange rate is endogenous, which means that it is partially determined by variables that significantly impacts. Another important point is the connection between exchange rates and inflation.