NATIONAL BANK OF ROMANIA MONETARY POLICY TRANSMISSION MECHANISM DURING THE CRISIS

• Main Authors: DIACONESCU DIANA RALUCA, BOTEZATU HORTENSIA PAULA
• Format: Article
• Language: English
• Published: Academica Brâncuşi 2015-04-01
• Series: Analele Universităţii Constantin Brâncuşi din Târgu Jiu : Seria Economie
• Subjects: monetary policy; inflation targeting; financial crisis
• Online Access: http://www.utgjiu.ro/revista/ec/pdf/2015-02/48_Diaconescu.pdf

Before the crisis, investments and foreign capital were injected in the Romanian economy. External financing has led to the emergence of a trend in the reduction of interest rates on credits and deposits and average interbank rate. In Romania, the international financial crisis hasn’t led to interbank financial market deformation, as happened in the case of many developed countries, but it has influenced the independent/autonomous liquidity volume and the structure of net liquidity offer. The most important consequence of the crisis in Romania was the reduction in capital inflows. This decreased the net liquidity of the banks and has created a lower demand for liquidity. Some Central Banks have acted in this regard, through the refill of existing liquidity deficit, equal to the difference between the demand for liquidity and net component. Other Banks that failed to cover the liquidity needs of their customers have borrowed from banks with liquidity surplus. This situation has been exploited by latter through the steep increase of interest rates.