The pyramid-scheme collapse

In early 1997 a group of investment schemes in Albania, some of them operating as pyramid schemes offering very high monthly returns, collapsed, wiping out the savings of a large share of households. The collapse set off widespread unrest and a breakdown of public order, and real GDP fell by around 7 percent that year as the economy and state institutions were disrupted, while inflation spiked. The Bank of Albania, which was then a young institution without much experience, helped restore confidence with support from the IMF and the international community, and the lek stabilised in the following years. The central bank gradually built its credibility and adopted inflation targeting in 2009, and the stability of prices and the exchange rate in the 2000s and 2010s contrasts strongly with the 1997 dislocation shown in Albania's charts.