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Stabilization and exchange rate policy in Romania

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  • Daniel Daianu

Abstract

This paper presents the major traits of the stabilization efforts underway, underlining the role of exchange rate policy. The surprisingly good response of the economy to the “policy shock” of 993–1994 is explained by the ubiquitous large X‐inefficiencies and the impact of the foreign exchange market on information and transaction costs. It is argued that restructuring and the imposition of good corporate governance on a wide scale, which are essential for reducing further inflation, need much more capital inflows (foreign direct investment) and the latter can be encouraged by faster privatization. Since systemic strain makes “stop and go” measures almost unavoidable, the challenge for policy‐makers is to avoid policy fluctuations of large amplitude and to enhance steadily their credibility.

Suggested Citation

  • Daniel Daianu, 1996. "Stabilization and exchange rate policy in Romania," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 4(1), pages 229-248, May.
  • Handle: RePEc:bla:etrans:v:4:y:1996:i:1:p:229-248
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    File URL: https://doi.org/10.1111/j.1468-0351.1996.tb00170.x
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    References listed on IDEAS

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    1. Richard Portes, 1986. "The Theory and Measurement of Macroeconomic Disequilibrium in Centrally Planned Economies," NBER Working Papers 1875, National Bureau of Economic Research, Inc.
    2. Daniel Daianu, 1994. "The Changing Mix of Disequilibria During Transition; A Romanian Background," IMF Working Papers 94/73, International Monetary Fund.
    3. Mohsin S. Khan & Dimitri G Demekas, 1991. "The Romanian Economic Reform Program," IMF Occasional Papers 89, International Monetary Fund.
    4. Daniel Daianu, 1994. "Inter-Enterprise Arrears in a Post-Command Economy; Thoughts From a Romanian Perspective," IMF Working Papers 94/54, International Monetary Fund.
    5. Guillermo Calvo & Carlos A. Végh Gramont, 1990. "Credibility and the Dynamics of Stabilization Policy; A Basic Framework," IMF Working Papers 90/110, International Monetary Fund.
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    Cited by:

    1. Tito Boeri & Joaquim Oliveira-Martins, 2002. "Transition, variété des produits et intégration économique," Economie & Prévision, La Documentation Française, vol. 0(1), pages 55-69.
    2. Tito Boeri & Joaquim Oliveira Martins, 2002. "Varieties, Jobs and EU Enlargement," Rivista di Politica Economica, SIPI Spa, vol. 92(1), pages 139-178, January-F.

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