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The impact of the recent global crisis on the prioritization of central banks final objectives. A structural approach in the context of Central and Eastern European states

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  • Iulian Vasile Popescu

    ("Al. I. Cuza" University of Iasi, Bd. Carol I no. 22, 700505, Iasi, Romania)

Abstract

This paper aims to identify the actual objectives of monetary authorities in Central and Eastern Europe (CEE) that promote an independent monetary policy. In this sense we consider the study of central banks (CBs) behavior in the Czech Republic, Poland, Romania and Hungary in establishing short-term nominal interest rate by estimating a Taylor-type monetary policy rule, with new features in terms of elements aimed at exploring the interactions between the monetary policy and financial stability. We estimate the monetary policy rule based on a dynamic stochastic general equilibrium model (DSGE). The main results revealed the strong stance of the selected monetary authorities towards their fundamental objective of price stability, but in parallel, towards stabilizing the exchange rate and real economic activity and the existence of specific elements indicating a leaning against the wind orientation of the monetary policy in countries under analysis. Following the emergence of international turmoil our analysis has identified the maintaining of a strong orientation towards the primary objective of monetary policy, a similar relative stance of monetary policy relative to the stabilization of the real activity alongside a decrease in the focus of stabilizing the exchange rate, while the accentuated focus on financial stability does not appear to be achieved through monetary policy.

Suggested Citation

  • Iulian Vasile Popescu, 2014. "The impact of the recent global crisis on the prioritization of central banks final objectives. A structural approach in the context of Central and Eastern European states," International Journal of Business and Economic Sciences Applied Research (IJBESAR), International Hellenic University (IHU), Kavala Campus, Greece (formerly Eastern Macedonia and Thrace Institute of Technology - EMaTTech), vol. 7(2), pages 51-76, September.
    • Handle: RePEc:tei:journl:v:7:y:2014:i:2:p:51-76
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    Cited by:

    1. Mahmut Sami Güngör & Bülent Güloğlu, 2019. "The Effects of Structural Shocks on Macroeconomic Fundamentals under Aggressive Monetary Policy: The Case of Turkey," International Journal of Business and Economic Sciences Applied Research (IJBESAR), International Hellenic University (IHU), Kavala Campus, Greece (formerly Eastern Macedonia and Thrace Institute of Technology - EMaTTech), vol. 12(2), pages 7-21, December.

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    More about this item

    Keywords

    DSGE models; Taylor rules; monetary policy; Bayesian methods; Central and Eastern Europe;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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