Romania's Shift to Inflation Targeting and Capital Account Liberalization: What to Expect
The article examines how Romania's shift to inflation targeting and capital account liberalization will impact monetary policy's ability to maintain price stability. Using a model with sticky prices and monopolistic competition, the study assesses the resilience of current and future monetary policy regimes to shocks. The researchers evaluate the effects of these changes on welfare criteria, including a central bank loss function and the compensating variation measure.