EFFECTIVENESS OF MONETARY POLICY IN ROMANIA

Abstract

The efficiency of monetary policy at macroeconomic level presupposes the study of Taylor's relationship: the change in the interest rate leads to changes in the current and estimated inflation rate as well as in actual and potential GDP. This article studies the effectiveness of monetary policy in Romania, between 2005 and 2017, both monthly and quarterly, with the help of the ARDL methodology. The results show that monetary policy has been adaptive over the last 20 years; over the years the interest rate cut has led to lower inflation and GDP cuts, with equilibrium interest rates lower than Taylor's interest.

Keywords

• interest rate
• inflation
• gdp