Some Issues Involved by the Policies Concerning Exchange Rate and Inflation: Quantitative Approach

Abstract:     
The paper examines several facets of the interaction between inflation targeting policy and pegged float exchange rate regime, using the last version of the Romanian macromodel. The implications induced by changes in the following exogenous variables are quantitatively estimated:

• CBE – coefficient measuring the Central Bank’s intervention on the forex currency market, which is attached to the equation of the exchange rate, and
• CBM - coefficient measuring the Central Bank’s intervention on the domestic monetary market, which is attached to the equation of the reference interest rate.

The model simulations refer to leading macroeconomic variables, especially the real economic growth, the foreign trade balance (net exports), the consumer price index, and the nominal exchange rate.

Number of Pages in PDF File: 8

Keywords: exchange rate, reference interest rate, simulations

JEL Classification: C15, E52

Accepted Paper Series