A CENTRAL BANK’S DILEMMAS IN HIGHLY UNCERTAIN TIMES - A ROMANIAN VIEW

Daniel Daianu
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Daniel Daianu: National School of Political and Administrative Studies (SNSPA), Bucharest.

Journal for Economic Forecasting, 2015, issue 1, 159-180

Abstract: This paper looks at policy dilemmas the National Bank of Romania has faced over the years, with the analysis framed in a European and historical context. Some of these dilemmas are of an older vintage, such as how to deal with massive capital flows, how to combat high inflation when resource misallocation is a very burdensome legacy and expectations of high inflation are well entrenched. Other dilemmas are pretty new, or have got salience during the Great Recession. Romania has had to undertake a painful correction of its large macroeconomic imbalances. “Light” inflation targeting has provided leeway for mitigating the fallout from the financial crisis, although high euroization has dented its efficacy. The specter of stagnation in the Euro Area, financial deleveraging, unconventional policies which are pursued by key central banks, the ongoing reform of banking regulation and supervision, a growing shadow banking, how will the Banking Union evolve, etc, make up a very complicated European context and pose a range of big challenges for the central banks of New Member States (NMSs).

Keywords: central bank; credit; deflation; dilemma; Euro Area; European Union; financial cycle; financial stability; macro prudential policy; stagnation (search for similar items in EconPapers)
JEL-codes: E44 E51 E58 F36 F45 G01 G28 (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:rjr:romjef:v::y:2015:i:1:p:159-180

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