Interest rate channel in Romania: assessing the effectiveness transmission of monetary policy impulses to inflation and economic growth

The purpose of our paper is to evaluate the effectiveness of monetary policy transmission mechanism in Romania, via interest rate channel. Using a Vector Error Correction Model and impulse response analysis, we study the impact of a positive monetary policy shock via short term interest rate on macroeconomic variables over the period 2003M01-2012M06. Our empirical results are in line with economic theory and we can say that we are witnessing to an improvement in the transmission effectiveness of monetary policy impulses via interest rate channel.