Acta Universitatis Danubius. Œconomica, Vol. 10, No. 4

Abstract

From a conducted centralized economy, Kosovo’s economy became a free market after
1999. This made the economy of Kosovo to face a lot of challenges. One of them and still a topic not
studied among Kosovo economists is the Kosovo currency. Kosovo is not yet a member of EU but
since 2002 is using euro currency. What are the advantages and disadvantages of using euro currency
for the economy of Kosovo? This was not questionable in 2002, because Kosovo was still in the first
steps of creating a financial system. But, today the importance of exchange rates in economy is
crucial as a result of the internationalization of businesses, the constant increase of world trade with
the national one and the rapid change of money transfer technology. In this research, through
quantitative and qualitative methods is analyzed the development of exchange rate market in Kosovo
and the effects of exchange rates movements in Kosovo economy, its GDP and inflation and in
consumer price index. The research will point out the importance of exchange rates as an interest
variable for some of Kosovo businesses and its effects in the transition economy of Kosovo which has
not been exposed to exchange rates risk on macroeconomic variables.