The Governor received yesterday Doctor Honoris Causa title from the Romanian-American University.
The balance exchange rate that everyone dreams of is a “black box” that can differ depending on the period, the moves that lead to the overvaluation or the undervaluation of the currency being determined by a herd effect that is dominant within the banking system, National Bank of Romania (BNR) Governor Mugur Isarescu stated yesterday, Mediafax informs.
“For every historical moment there may be a different equilibrium exchange rate,” Isarescu said in a speech given after receiving the Doctor Honoris Causa title from the Romanian-American University.
Isarescu also pointed out that in the banking system the herd effect sometimes leads to “overshooting” in the sense that the exchange rate tends to be either overvalued or undervalued and that in time these moves set the equilibrium exchange rate or the fair value that best optimizes the equilibrium on the monetary market.
He also stated that the Central Bank’s policy of not modifying the monetary policy’s interest rate will take the inflation rate toward its target in the following period, explaining that “one doesn’t need a handful of drugs for a doctor to be good.”
Moreover, Isarescu warned the bankers that regulatory measures will be necessary in the upcoming period. He referred to macro-cautionary policies, a new concept that seeks to ensure the solidity of the financial system as a whole and to avoid systemic risk, a concept that does not replace macroeconomic policies (monetary and fiscal policies) or micro-cautionary policies that seek to ensure the solidity of banking institutions as individual entities.
According to Isarescu, the regulatory drive will see significant progress in the following years and regulatory measures will be efficient if they are adopted in all countries at European level, otherwise the banks will resort to externalizing forex-denominated credits for example.