Central banks should target the price level not the NGDP

Yesterday the inflation data for the EU countries was released. For the euro zone inflation remains high at 2.7% while the ECB target is at “utmost 2%”. If these were normal times (i.e. before 2007) the headlines in the mainstream media would have demanded ECB to take immediate action. Continue reading “Central banks should target the price level not the NGDP”

Should we save the 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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Continue reading “Should we save the RON?”