Monetary Policy and Central Bank Independence in a Former Communist Country; Curious Evolutions in Romania

Abstract

The subject of central bank independence has been the focus of debates during the 1990s and 2000s. It seems that consensus has been reached over the need to support high legal central bank independence in order to achieve price stability, and lower inflation rates. However, many doubt this institutional arrangement has the desired outcome in all cases and fear that cultural elements such as inflation aversion among citizens, tradition of rule of law and other factors may be more important. Romania, as member of the European Union, has to comply with the high legal central bank independence requirements. Despite the alleged progress of the National Bank of Romania, concerns regarding its real independence from the government still remain. The article explores the development of central bank independence in relation to monetary policy, in the case of Romania.