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

Author/Editor:

Nikolay Gueorguiev ; Pelin Berkmen

Publication Date:

December 1, 2004

Electronic Access:

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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).

Series:

Working Paper No. 2004/232

Subject:

Capital controls Consumption Exchange rates Inflation Real exchange rates

English

Publication Date:

December 1, 2004

ISBN/ISSN:

9781451875591/1018-5941

Stock No:

WPIEA2322004

Pages:

35

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