Inflation Targeting In Romania in the Perspective of Joining the Exchange Rate Mechanism II

Marius Apostoaie

Timisoara Journal of Economics, 2011, vol. 4, issue 1(13), 43-56

Abstract: Since the early 1990, when the Reserve Bank of New Zeeland instituted for the first time inflation targeting (IT) as its monetary policy framework, IT gained reputation, becoming the monetary regime of choice of many central banks around the world. Among them, the National Bank or Romania changed in mid-2005 the strategy of the monetary policy with IT. As a member of the European Union, Romania’s ultimately aspiration is the adoption of the euro as a means to achieve its objective of full participation in the European Monetary Union. In order to accomplish that, among other nominal and real convergence criteria, Romania must spend at least two years in the ERM II, keeping its exchange rate towards the euro stable, inside a band of ±15%. The purpose of this paper is to identify the challenges of direct IT implementation in Romania in the current context with the perspective of joining the ERM II. We will find out that IT, as current monetary policy strategy, is to be maintained at least until the ERM II entry. After that the NBR’s focus will shift back from price stability to exchange rate stability, and thus, a strict IT framework will not be appropriate anymore (the co-existence of IT with an explicit exchange rate objective being quite problematic). The paper concludes that a soft version of inflation-targeting is more appropriate under the given circumstances.

Keywords: Monetary policy; inflation targeting; european monetary union; ERM II (search for similar items in EconPapers)
JEL-codes: E52 E58 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://tje.uvt.ro/index.php/tje/article/download/103/pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wun:journl:tje:v04:y2011:i1(13):a06

Ordering information: This journal article can be ordered from
16 J. H. Pestalozzi Street, 300115, Timisoara, Romania
https://tje.uvt.ro

Access Statistics for this article

Timisoara Journal of Economics is currently edited by Camelia Margea

More articles in Timisoara Journal of Economics from West University of Timisoara, Romania, Faculty of Economics and Business Administration Contact information at EDIRC.
Bibliographic data for series maintained by Romeo Margea ().