The role and impact of the base rate of interest in economic growth in developing countries: A regulatory policy context
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Mateus Habili 
, Rovena Vangjel
This work is licensed under a Creative Commons Attribution 4.0 International License.
Abstract
This study examines the impact of the base interest rate on economic growth in Albania. The variables considered are economic growth, base interest rate, nominal effective exchange rate (NEER), and inflation. The analysis applied in the study is multiple regression. The study uses time series data from 2006 to 2022. The results show that the base interest rate indirectly affects economic growth. This suggests that the combination of variables used in the study may need to be more practical for predicting economic growth in Albania. However, this may also depend on the country and the parameters of the variables in each country. The study creates a panorama of the effect of the base interest rate on economic growth as it brings about a domino effect, where it affects the interest rate, which involves the withdrawal of capital and the level of loans. Through this study, it has been found that the base interest rate in Albania does not impact the economic growth of Albania, which makes it an essential instrument for economic growth. Inflation negatively affects economic growth.
Keywords: Interest Rates, International Business Cycles, Inflation, Foreign Exchange
Authors’ individual contribution: Conceptualization — M.H.; Methodology — M.H.; Formal Analysis — M.H.; Writing — Original Draft — M.H.; Writing — Review & Editing — R.V.; Supervision — R.V.
Declaration of conflicting interests: The Authors declare that there is no conflict of interest.
JEL Classification: E31, E43, F31, F44
Received: 14.10.2023
Accepted: 12.09.2024
Published online: 16.09.2024
How to cite this paper: Habili, M., & Vangjel, R. (2024). The role and impact of the base rate of interest in economic growth in developing countries: A regulatory policy context. Journal of Governance & Regulation, 13(4), 35–45. https://doi.org/10.22495/jgrv13i4art4
