Abstract

The psychology of investment and investor behavior in financial markets presents a major challenge for developing countries, especially those transitioning from communist regimes. These emerging market economies, established after authoritarian systems, are directly affected by economic fluctuations caused by how investors and consumers perceive and react to market conditions.
Challenges in adapting to modern development models, poor economic performance, widespread corruption, legal uncertainty, and migratory flows have resulted in hybrid economic structures where neoclassical principles are combined with psychological behavior elements. Albania exemplifies this situation. Since the 1990 transition, the country has faced many difficulties in rebuilding its economic system. Domestic and foreign investments are impacted by frequent regulatory changes, unpredictable behavior of economic actors, and a lack of institutional stability. Corrupt practices, legal enforcement uncertainties, and money laundering continue to obstruct market functioning and significantly influence investment decisions.
This paper aims to analyze the economic theories in Albania and demonstrate how these theories interact with an economy impacted by money laundering. The methodology combines both qualitative and quantitative empirical data gathered from theoretical literature as well as national and international statistical sources, enabling an objective comparison of the factors influencing investment behavior in the country.