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

Author

Listed:
  • VASILE Eliza-Alexandra

    (Lucian Blaga University of Sibiu)

  • DOBROTA Gabriela

    ("Constantin Brâncuși" University of Târgu-Jiu)

Abstract

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.

Suggested Citation

  • VASILE Eliza-Alexandra & DOBROTA Gabriela, 2023. "To What Extent Do The Monetary Policy Decisions Lead To The Fulfillment Of The Objective Of The National Bank Of Romania?," Revista Economica, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 75(4), pages 94-109, December.
  • Handle: RePEc:blg:reveco:v:75:y:2023:i:4:p:94-109
    DOI: 10.56043/reveco-2023-0041
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    More about this item

    Keywords

    Banking System; Central Banks; Monetary Policy; Inflation; Econometric Model;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E59 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Other

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