Macroeconomic Implications of the Transition to Inflation Targeting and Capital Account Liberalization in Romania

December 1, 2004

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Nikolay Gueorguiev, and Pelin Berkmen. Macroeconomic Implications of the Transition to Inflation Targeting and Capital Account Liberalization in Romania, (USA: International Monetary Fund, 2004) accessed November 23, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

In the near future, Romania will introduce inflation targeting and fully liberalize its capital account. This paper aims to analyze, in a dynamic general-equilibrium model with sticky prices and monopolistic competition, how these two profound changes will affect the ability of monetary policy to pursue its objective of price stability. In particular, the resilience of the current and future monetary policy regimes to shocks is evaluated against two welfare criteria: a standard central bank loss function containing the deviations of inflation, output, and the real exchange rate from their equilibrium values, and the compensating variation measure of Lucas (1987).

Subject: Capital controls, Consumption, Exchange rates, Inflation, Real exchange rates

Keywords: Exchange rate, Inflation targeting, Interest rate, WP

Publication Details

Pages:

35
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2004/232
Stock No:

WPIEA2322004
ISBN:

9781451875591
ISSN:

1018-5941

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