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Central Bank Independence and Inflation Targeting.The Case of Romania


  • Florin Cornel Dumiter

    () (“Vasile Goldis” Western University Arad, Romania)


There is a widespread agreement among central bankers around the world that the stability of the national currency should be entrusted to independent central banks. There are two arguments supporting this idea: 1. to achieve macroeconomic stability, a low and stable inflation is required, an independent central bank having the means and the tools to pursue it as opposed to governments that through its spending often trigger high inflation rates; 2. an independent central bank can signal effective and credible inflation expectations by implementing an effective monetary policy. In our opinion, over the last twenty years, there has been a sustained trend towards central bank independence, governments around the world being aware that independent central banks can sustain growth. A great number of central banks have adopted an inflation targeting regime, given its advantages as compared to classical monetary anchors (i.e. money supply and foreign exchange rate) of an increasing number of central banks. The first section of the paper is a survey of the literature concerning central bank independence and inflation targeting. The second section deals with aspects of central bank independence and inflation targeting in Romania over the last two decades. In the final section an index for central bank independence and inflation targeting is developed using the following three groups of variables: political and legal central bank independence, central bank governance and conduct of monetary policy and central bank transparency and accountability. The paper concludes that the new index for central bank independence and inflation targeting can eliminate the differences between de jure and de facto independence in order to measure independence both for developed countries and emerging countries based on some legal aspect and of some actual practice and behaviour of the central banks.

Suggested Citation

  • Florin Cornel Dumiter, 2009. "Central Bank Independence and Inflation Targeting.The Case of Romania," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 12(33), pages 23-60, (3).
  • Handle: RePEc:rej:journl:v:12:y:2009:i:33:p:23-60

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    References listed on IDEAS

    1. Alesina, Alberto & Gatti, Roberta, 1995. "Independent Central Banks: Low Inflation at No Cost?," American Economic Review, American Economic Association, vol. 85(2), pages 196-200, May.
    2. Loungani, Prakash & Sheets, Nathan, 1997. "Central Bank Independence, Inflation, and Growth in Transition Economies," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(3), pages 381-399, August.
    3. Eijffinger, S. & De Hann, J., 1995. "The Political Economy of Central Bank Independence," Papers 9587, Tilburg - Center for Economic Research.
    4. Patricia S. Pollard, 2003. "A look inside two central banks: the European Central Bank and the Federal Reserve," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 11-30.
    5. Cukierman, Alex & Webb, Steven B & Neyapti, Bilin, 1992. "Measuring the Independence of Central Banks and Its Effect on Policy Outcomes," World Bank Economic Review, World Bank Group, vol. 6(3), pages 353-398, September.
    6. Forder, James, 1996. "On the Assessment and Implementation of 'Institutional' Remedies," Oxford Economic Papers, Oxford University Press, vol. 48(1), pages 39-51, January.
    7. Guy Debelle & Stanley Fischer, 1994. "How independent should a central bank be?," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 38, pages 195-225.
    8. Helmut Wagner, 1998. "Central Banking in Transition Countries," IMF Working Papers 98/126, International Monetary Fund.
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    Cited by:

    1. Nikolay NENOVSKY & Kiril TOCHKOV & Camélia TURCU, 2011. "Monetary Regimes and EU Accession: Comparing Bulgaria and Romania," LEO Working Papers / DR LEO 1251, Orleans Economics Laboratory / Laboratoire d'Economie d'Orleans (LEO), University of Orleans.

    More about this item


    central bank independence; inflation targeting; monetary policy; price stability; central bank credibility;

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies


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