Un mediu economic competitiv este benefic in primul rand consumatorului pentru ca reduce preturile. In Romania scaderea preturilor nu este asociata cu o crestere a competitivitatii dar mai degraba cu recesiunea. Continue reading
Tag Archives: RON
In my last post I was arguing mostly from a theoretical point of view that Inflation Targeting has failed in Romania. To be fair it was never been given a fair chance. Two years into implementing the regime the NBR decided not target inflation but the exchange rate . One perverse result from this in an economy with historically high inflation and no growth is dominance of local currency by ones from countries with economic growth and low inflation. In other words the central bank has implicitly subsidized the dominance of EUR by undermining RON.
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Last week I looked in detail at the NBR statement after the decision to cut the key policy rate by 25 basis points. To refresh, my conclusions there were that due to a badly damaged credit channel to relax monetary conditions NBR will have to depreciate the currency in nominal terms or lower the minimum reserve requirements (MRR) for RON and EUR.
Last night Deputy Governor Cristian Popa was on TV and among other topics he mentioned the monetary conditions. His talk confirms my estimate that the only way to relax monetary conditions is by depreciating the RON.
Just here me out. Continue reading