Guido della Valle, Vasilika Kota, Romain Veyrune, Ezequiel Cabezon, and Shaoyu Guo
INTERNATIONAL MONETARY FUND
This paper proposes a methodology to develop empirically based and theoretically
consistent deeuroization policies. It is derived from the experience of Albania. The paper
is the first attempt to provide an empirical measure of the optimal level of euroization.
The results indicate that euroization is trending above the estimated measure in Albania,
calling for deeuroization policies. In the long term, deeuroization requires maintaining the
commitment to low and stable inflation in a context of greater exchange rate flexibility to
encourage saving in local currency. In the short term, policies that mitigate the financial
stability risk due to euroization contribute to deeuroization inasmuch as they make
banking intermediation in euro less financially attractive to the public.