THE MONETARY POLICY OF THE NATIONAL BANK OF ROMANIA IN THE INFLATION TARGETING ERA. A TAYLOR RULE APPROACH

Bogdan Capraru, Norel Ionut Moise () and Andrei Radulescu
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Norel Ionut Moise: Bucharest University of Economic Studies
Andrei Radulescu: Institute for World Economy/Romanian Academy, Banca Transilvania, Bucharest

Review of Economic and Business Studies, 2015, issue 16, 91-102

Abstract: In this paper we analyse the monetary policy of the National Bank of Romania during 2005-2015 by estimating the Taylor rule, on a quarterly basis. We determined the potential GDP by employing the Hodrick-Prescott filter, in order to distinguish between the cyclical and the structural components of the output. Then, we estimated the traditional Taylor rule function (with a classic OLS regression), but slightly modified, as to take into account the forward-looking attitude of the NBR. The results confirm the direct correlation between the monetary policy rate and the output gap on the one hand, and the inflation differential (inflation – inflationtarget) on the other hand. Also, the results show us that NBR paid a higher attention to the dynamics of the inflation versus its target than to the output gap. Last, but not least, the central bank has been also sensitive to the financial stability, as reflected by the results of the incorporation of the ROBOR-EURIBOR spread in the classical Taylor rule.

Keywords: monetay policy; Taylor rule; National Bank of Romania (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:aic:revebs:y:2015:d:16:caprarub

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