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The Coordination of the Monetary and Fiscal Policies in Romania and their Impact on the Economic Cycle

Author

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  • Bogdan Andrei DUMITRESCU

    (The Bucharest University of Economic Studies, The Faculty of Finance, Insurance, Banking and Stock Exchange, Department of Money and Banking)

Abstract

A rate of economic growth close to potential while ensuring a low inflation rate is the primary objective of macroeconomic policies. The monetary and fiscal policies are widely used in Romania and in the European Union to achieve this goal, as modifying their stance is seen as a way to reduce the amplitude of the business cycle fluctuations. This research aims to assess how the monetary and fiscal policies have managed to smooth the business cycle fluctuations in Romania during 2004-2014 and also their degree of coordination and to analyze the restrictions applying to these policies given the rule-based framework within they operate. The results show a lack of coordination of the fiscal and monetary policies, the former permanent acting pro cyclically in the analyzed period, while the latter acting only partly counter cyclically, being mainly concerned with achieving price stability.

Suggested Citation

  • Bogdan Andrei DUMITRESCU, 2015. "The Coordination of the Monetary and Fiscal Policies in Romania and their Impact on the Economic Cycle," Romanian Journal of Economics, Institute of National Economy, vol. 40(1(49)), pages 184-197, june.
    • Handle: RePEc:ine:journl:v:40:y:2015:i:49:p:184-197
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    References listed on IDEAS

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    1. Antonio Fatás & Ilian Mihov, 2003. "The Case for Restricting Fiscal Policy Discretion," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(4), pages 1419-1447.
    2. Peter N. Ireland, 2002. ""Rules Rather Than Discretion" After Twenty Five Years: What Have We Learned? What More Can We Learn?," Boston College Working Papers in Economics 530, Boston College Department of Economics.
    3. Alexandra ADAM & Silvia Elena IACOB, 2014. "Fiscal consolidation through fiscal rules?," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(2(591)), pages 109-114, February.
    4. repec:agr:journl:v:2(591):y:2014:i:2(591):p:109-114 is not listed on IDEAS
    5. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-491, June.
    6. International Monetary Fund, 1998. "Coordination of Monetary and Fiscal Policies," IMF Working Papers 1998/025, International Monetary Fund.
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    Cited by:

    1. Tchablemane Yenlide, 2020. "Possibilité d’une union monétaire dans la zone CEDEAO : Test de coordination des politiques budgétaires et monétaires," Working Papers hal-02560792, HAL.

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    More about this item

    Keywords

    fiscal policy; monetary policy; coordination; countercyclical policies;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy

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