Abstract: In a world with diverse currencies, the exchange rate remains a key factor influencing the relative prices of goods and services between countries. Following the collapse of the Bretton Woods system in 1973, exchange rate fluctuations and currency risks became part of the international economy. The presence of two major currencies, the Euro and the U.S. Dollar (USD), facilitates trade but does not eliminate currency risks. Albania, still outside the European Union and the Eurozone, uses its currency, the Albanian Lek (ALL), and its fluctuations against the Euro and USD have become increasingly concerning, especially for an economy progressively open to international markets. The Bank of Albania, as the central bank of the country, does not seem inclined to influence the foreign exchange markets beyond a certain extent, preferring a free foreign exchange market regardless of the results it brings. This analysis focuses on the impact of the exchange rate on Albania's foreign trade over the past five years. Through econometric analysis of data, it will be shown that the exchange rate plays a limited role in the country’s foreign trade, while other significant factors influence both this trade and exchange rate fluctuations.

Keywords: Exchange rate, import, export, risk, trade balance, volatility, Albania

Pages: 786-796