Challenges and Prospects
Edited by Klaus Liebscher, Josef Christl, Peter Mooslechner and Doris Ritzberger-Grünwald
9. Disinﬂation and monetary policy arrangements in Romania Daniel Daianu and Ella Kallai 1. INTRODUCTION1 Disinﬂation has been pursued successfully in Romania in recent years. Inﬂation came down from over 40 per cent in 2001 to 14 per cent in 2003 and 9.3 per cent in 2004. By 2007 it should come down to around 3 per cent. The beneﬁts of a low-inﬂation environment are unquestionable, as price stability is the ultimate objective of monetary policy. In addition, low inﬂation is a pre-condition for EU accession. There only remains the other critical question, namely, what is the proper strategy to achieve the ultimate objective? Diﬀerent central banks have adopted diﬀerent strategies, placing a diﬀerent emphasis on the various pieces of information, elements of their decision-making process or diﬀerent aspects of their communication policies. Inﬂation targeting (IT) is one of those strategies. The National Bank of Romania (NBR) plans to introduce IT in 2005. This regime brings a series of beneﬁts for a central bank, including a clear policy focus on inﬂation. At the same time the Romanian central bank needs to unburden its monetary policy to achieve further disinﬂation. But three main contradictory pressures are likely to arise: ﬁrst, the requirements imposed by the need to achieve nominal and real convergence with a view to joining the EU in 2007 and European Monetary Union (EMU) at a later stage push the central bank toward a policy...
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