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Modelling anti-inflationary monetary targeting: with an application to Romania

Marcelo Sánchez

No 1186, Working Paper Series from European Central Bank

Abstract: This paper attempts to characterise an anti-inflationary monetary targeting (MT) regime. In order to derive a formal representation of this regime, we formulate the central bank’s optimisation problem under the assumption that it is possible for the monetary targeted variable to have an impact on inflation. We apply a rather general framework to the Romanian experience with MT in the period 1999-2005. We find that during this period Romania's MT regime can be characterised by a concern for price stability and an additional role for smoothing of the central bank's instrument (base money growth). Our results suggest that exchange rate variability and output gap stability appear not to have entered the objective function significantly. JEL Classification: E52, E58, C32, C61

Keywords: Monetary Targeting; optimal monetary policy; Romania (search for similar items in EconPapers)
Date: 2010-05
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon and nep-tra
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20101186

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