The Monetary Policy in a Changing World

Author:Mariana Trandafir, Georgeta Dragomir
Performance and Risks in the European Economy
The Monetary Policy in a Changing World
Mariana Trandafir1, Georgeta Dragomir2
Abstract: In a context where ―the economies‘ evolution is driven by the crisis‖, the monetary policies are
facing, in the po st-crisis period, challenges that bring to the forefront of debates the rethinking of objectives,
strategies and even implementation tools. This paper presents in a comparative analysis, the relevance of
price stability in terms of theoretical fundaments and effectiveness of the concept for the pre and post crisis
periods, in the Eurozone, the US and Japan in an attempt to identify the explicative resorts of the central
bank‘s monetary behavior. At this time when the central banks are obliged to unconventional measures to
save the global economy from the d anger of deflation, the topic is important and timely addressed. The paper
uses statistical data of official documents taken from the International Monetary Fund, European Union and
central bank websites.
Keywords: price stability; central bank; the global financial crisis; unconventional measures
JEL Classification: E31; E52; E58
1. Introduction
Although in the conception close to the current one, the first central bank was founded in 1694 (Bank
of England), the monetary policy occurred during the Great Depression of the years 1929 to 1933, as a
government response that aimed at steming the Federal Reserve System US financial panic and bank
insolvency and they have over time gained new values. Until the Great Depression, the central banks
had to intervene as creditor of last resort to commercial banks and insuring financing of state
government spending.
Following the line of Keynesian thought, the expansionary monetary policies implemented after the
crash of 1929, designed to stimulate the economic growth by influencing the aggregate demand and
which treated inflation as insignificant factor in the development of economy showed prominently its
In the early 70s, the monetary practice, under the sphere of influence of Keynesian theory and
theoretical construction of 1958, the Phillips curve, which established an inflation-unemployment
compromise, confronted increasingly high levels of inflation, the monetary policy being mainly
oriented towards ensuring full employment. It is the time for the emergence of new alternative
1 Associate Professor, PhD, ―Danubius‖ University of Galati, Romania, Address: 3 Galati Boulevard, 80 0654 Galati,
Romania, Tel.: +40.372.361.102, fax: +40.372.361.290, E-mail:
2 Professor, PhD, ―Danubius‖ University of Galati, Ro mania, Address: 3 Galati Boulevard, 800654 Galati, Romania, Tel.:
+40.372.361.102, fax: +40.372.361.290, Corresponding author:

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