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Disinflation and Inflation Targeting in Romania

Author

Listed:
  • Daianu, Daniel

    (Professor of economics at the School of Political and Administrative Studies (SNSPA) in Bucharest and a member of the Romanian Academy)

  • Kallai, Ella

    (Chief economist at Alpha Bank Romania)

Abstract

With a view of enhancing disinflation inflation targeting (IT) was introduced in Romania in mid-2005. Contradictory pressures have challenged ever since the functioning of this monetary policy regime owing to peculiar features and objectives of the Romanian economy. First, the requirements imposed by the achievement of nominal and real convergence in order to join the European Union, and, eventually, the European Monetary Union, ask for sustainable high economic growth and the consolidation of disinflation simultaneously, which is an extremely ambitious task. Second, the economics of inflation targeting tells that the “divine coincidence” of inflation stabilization and real stabilization objectives can be achieved in specific economic circumstances, which might be pretty hard to fulfill in the Romanian economy. Third, the operational requirements of the implementation of a strict inflation targeting regime are unlikely to be met under the current monetary transmission mechanisms; this paper argues that a soft version of inflation-targeting is feasible under the circumstances. Fourth, the integration into global financial market (and a premature opening of the capital account) increases the sensitivity of the economy to external shocks and diminishes the efficiency of an independent monetary policy.

Suggested Citation

  • Daianu, Daniel & Kallai, Ella, 2008. "Disinflation and Inflation Targeting in Romania," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 5(1), pages 59-81, March.
    • Handle: RePEc:rjr:romjef:v:5:y:2008:i:1:p:59-81
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    References listed on IDEAS

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    Cited by:

    1. repec:cmj:journl:y:2013:i:29:cioran is not listed on IDEAS
    2. Tiwari, Aviral Kumar & Mutascu, Mihai & Andries, Alin Marius, 2013. "Decomposing time-frequency relationship between producer price and consumer price indices in Romania through wavelet analysis," Economic Modelling, Elsevier, vol. 31(C), pages 151-159.
    3. Bogdan IFTIMIE & Simona-Mihaela CHIRU, 2016. "Macroeconomic Performances Under Inflation Targeting. The Case Of Romania," ECONOMIC COMPUTATION AND ECONOMIC CYBERNETICS STUDIES AND RESEARCH, Faculty of Economic Cybernetics, Statistics and Informatics, vol. 50(3), pages 193-209.
    4. Marius Constantin APOSTOAIE, 2011. "Inflation Targeting In Romania in the Perspective of Joining the Exchange Rate Mechanism II," Timisoara Journal of Economics, West University of Timisoara, Romania, Faculty of Economics and Business Administration, vol. 4(1(13)), pages 43-56.
    5. Zina V.MARCU căs. CIORAN, 2013. "Monetary Policy And The Inflation Targeting Strategy," SEA - Practical Application of Science, Romanian Foundation for Business Intelligence, Editorial Department, issue 2, pages 167-173, October.
    6. Ionuţ Gavriş & Valentin Toader, 2021. "The Probability Of Uncertainty: Romania’S Growth Perspectives," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 71-81, July.
    7. Dejan Zivkov & Slavica Manic & Jasmina Duraskovic & Jelena Kovacevic, 2019. "Bidirectional Nexus between Inflation and Inflation Uncertainty in the Asian Emerging Markets – The GARCH-in-Mean Approach," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 69(6), pages 580-599, December.
    8. Federico Sturzenegger, 2019. "Macri´s Macro: The meandering road to stability and growth," Working Papers 135, Universidad de San Andres, Departamento de Economia, revised Oct 2019.

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    More about this item

    Keywords

    inflation targeting; Romania;

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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