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June 22, 2021

Monetary policy had an anti-cyclical conduct before and after the crisis, Isarescu says

The monetary policy had an anti-cyclical conduct in Romania before and after the global economic crisis began, Romanian National Bank (BNR) governor Mugur Isarescu told the 2nd edition of the debate-forum ‘BNR Academica’ 2013 held in Constanta, Agerpres reports. ‘In Romania, the monetary policy was aimed at cutting down the inflation rate, which, despite some temporary interruptions in the trend, is currently heading towards a level comparable with the European definition of stability of process. BNR acted in the sense of providing an adequate macro-prudential framework to restabilize economic balances and maintain the financial stability’, showed the document presented by Isarescu at the forum.
According to him, during the times of economic expansion, BNR adopted a restrictive policy, operating significant increases in the rate of the compulsory minimum reserves, increases in the monetary policy interest rates, while also tightening the lending norms. During the times of economic recession, BNR acted in the sense of stimulating the aggregate demand, through reducing rates of monetary policy and significantly cutting down the rates of the compulsory minimum reserves. ‘The differences between the monetary policy in emergent economies and the one in developed countries is generated by the different economic contexts. Thus, in the developed economies, the rate of the monetary policy was cut down to almost zero ever since the beginning of the crisis, in order to avoid the risk of deflation, while, in exchange, in the emergent economies, the supply shock prevented a deeper cut in the rate of the monetary policy’, said the abovementioned document.
The BNR governor also specified in his presentation that the monetary policy operated towards a maximization of welfare, with this process implying the ensuring of the stability of process and maintaining of the production as close to the potential as possible. ‘In an effort to stabilize the prices, the monetary policy implicitly contributes to a sustainable economic growth. No country was able to maintain at relatively high rates its economic growth for a long time with high inflation’, informs the document.

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