Working Papers of National Institute of Economic Research, Romanian Academy 120723
We deal with the evolutions of monetary conditions in Romania before and during the economic crisis, and the extent to which GDP shocks are related to these conditions. The results confirmed the essential role of interest rate, credit and exchange rate in this respect, which underlines the importance of the monetary policy measures for stimulating the domestic/external demand. The exchange rate has an important weight, which shows the contribution of the currency depreciation to the pre-crisis increase of the domestic product. During the crisis (2008-2010), the reduction of GDP growth is more ample than the reduction of monetary conditions, revealing an important role of the real channel in transmitting shocks from abroad. The currency depreciation failed to stimulate the domestic product because of the low external demand, of similar devaluations of competitors' currencies, but also because of the increasing proportion of imports in the exported products. Under these conditions, the reduction in capital account had a substantially recessionistic effect. Since the end of 2010, the GDP oscillations have been restored around the monetary conditions, which have recovered the capacity to anticipate the macroeconomic evolution.
monetary conditions index GDP growth Macro-financial linkages