To What Extent Do The Monetary Policy Decisions Lead To The Fulfillment Of The Objective Of The National Bank Of Romania?

Monetary policy has had perhaps the most controversial definition and evolution over time, starting from maintaining the target of the gold standard, to creating a regulated set of measures and strategies by which the competent monetary authorities fulfill their main objective of keeping price stability. Considering the magnitude of the inflationary phenomenon in recent years, the Central Bank acted promptly and made several changes to monetary policy decisions. This research employs econometric analysis to address the query: "To what extent does the consumer price index impact monetary policy decisions?". To answer this question and to identify the positive and negative effects brought by the sudden change of monetary policy decisions a binomial econometric model was created with five variables, namely, a dependent variable, represented by the consumer price index, and four independent variables, respectively the monetary policy interest rate, the lending facility interest rate (lombard), the interest rate on the deposit facility and the exchange rate (EUR/RON). The research methodology is comprehensive, encompassing empirical qualitative and comparative analysis to scrutinize the inflationary phenomenon. Simultaneously, it utilizes econometric modelling to quantify pertinent indicators, which leads this paper, from the perspective of the nature of the research, towards a quantitative, test research. The results obtained highlight a significant and direct relationship between interest rates, the exchange rate and inflation.