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Theoretical and Applied Economics
No. 1 / 2006 (496)

Limits of Inflation Targeting Strategy

Cristian Socol
Aura Niculescu
Academia de Studii Economice Bucuresti

Abstract. This paper evaluates the trade-off between output volatility and the variability of the inflation rate around its target (Romanian case). The optimal choice for National Bank of Romania (NBR), in our opinion, is the flexible inflation targeting. For this purpose, NBR must explain the loss function and the optimal monetary policy rule. We then argued that this Romanian authority – NBR – can substantially improve its credibility under inflation targeting policy regime by becoming more accountable and transparent. Is the direct inflation targeting the best choice for the monetary policy regime in Romanian economy?

Keywords: output gap; inflation targeting; monetary policy rule; loss function; credibility.

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Marin Dinu

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The Economicity. The Epistemic Landscape, Marin Dinu, 2016


ISSN 1841-8678 (ediția print) / ISSN 1844-0029 (ediția online)
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