Abstract. This paper is evaluating the impact of external shocks that are affecting the Romanian economy by employing a Bayesian approach. By employing three Bayesian VAR models this paper provides an answer on the importance of external shocks using the impulse response functions, variance and historical decompositions. The relevance of the study is a major one as it quantifies the intensity of external shocks coming from the euro area that have the potential to affect the Romanian economy in terms of external demand, uncertainty and monetary policy, aspects which are of high interest especially in the new economic context of the COVID-19 health crisis.

Keywords: external demand, uncertainty, monetary policy, Bayesian VAR, variance, impulse response.