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Monetary Conditions and GDP Evolution in Romania

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  • Olteanu, Dan

Abstract

We deal with the evolutions of monetary conditions in Romania before and during the economic crisis, and the extent to which GDP shocks are related to these conditions. The results confirmed the essential role of interest rate, credit and exchange rate in this respect, which underlines the importance of the monetary policy measures for stimulating the domestic/external demand. The exchange rate has an important weight, which shows the contribution of the currency depreciation to the pre-crisis increase of the domestic product. During the crisis (2008-2010), the reduction of GDP growth is more ample than the reduction of monetary conditions, revealing an important role of the real channel in transmitting shocks from abroad. The currency depreciation failed to stimulate the domestic product because of the low external demand, of similar devaluations of competitors' currencies, but also because of the increasing proportion of imports in the exported products. Under these conditions, the reduction in capital account had a substantially recessionistic effect. Since the end of 2010, the GDP oscillations have been restored around the monetary conditions, which have recovered the capacity to anticipate the macroeconomic evolution.

Suggested Citation

  • Olteanu, Dan, 2012. "Monetary Conditions and GDP Evolution in Romania," Working Papers of National Institute for Economic Research 120723, Institutul National de Cercetari Economice (INCE).
    • Handle: RePEc:ror:wpince:120723
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    References listed on IDEAS

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    Cited by:

    1. OLTEANU, Dan, 2015. "Monetary Policy Effectiveness In Stimulating The Cees Credit Recovery," Studii Financiare (Financial Studies), Centre of Financial and Monetary Research "Victor Slavescu", vol. 19(3), pages 8-24.

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    More about this item

    Keywords

    monetary conditions index; GDP growth; Macro-financial linkages;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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