DRIIE-European studies

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Browsing DRIIE-European studies by Author "Dăianu, Daniel"

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    A central bank’s dilemmas in highly uncertain times - a Romanian view
    (Institute for Economic Forecasting, 2015-03) Dăianu, Daniel
    This paper looks at policy dilemmas the National Bank of Romania has faced over the years, with the analysis framed in a European and historical context. Some of these dilemmas are of an older vintage, such as how to deal with massive capital flows, how to combat high inflation when resource misallocation is a very burdensome legacy and expectations of high inflation are well entrenched. Other dilemmas are pretty new, or have got salience during the Great Recession. Romania has had to undertake a painful correction of its large macroeconomic imbalances. "Light" inflation targeting has provided leeway for mitigating the fallout from the financial crisis, although high euroization has dented its efficacy. The specter of stagnation in the Euro Area, financial deleveraging, unconventional policies which are pursued by key central banks, the ongoing reform of banking regulation and supervision, a growing shadow banking, how will the Banking Union evolve, etc, make up a very complicated European context and pose a range of big challenges for the central banks of New Member States (NMSs).
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    A new EU economic governance and fiscal framework : what role for the National Independent Fiscal Institutions (IFIs)?
    (European Institute of Romania, 2023-06) Dăianu, Daniel
    The European Commission's communication on orientations for a reform of the European Union's economic governance framework asks the European Fiscal Board (EFB) and national Independent Fiscal Institutions (IFIs) to play a more significant role in it. This vision has plenty of merit, but one needs to be careful in how to implement it. Structural reforms and public investment analysis demand an expertise hardly existing at the level of most national IFIs, and any involvement in policy design would make its assessment tricky when IFIs are part of the process: an inescapable conflict of interest would ensue. It could also be perceived as a technocratic encroachment on a democratic decision-making process. In order to play a more significant role in the EU economic governance framework, national IFIs need more resources according to the EU-wide acceptable standards of operation, and, first of all, they need to bolster their macroeconomic and debt sustainability analysis capabilities.
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    EURO zone crisis and EU governance: Tackling a flawed design and inadequate policy arrangements (an essay)
    (Akademiai Kiado, 2012-09) Dăianu, Daniel
    This paper focuses on the roots of strain in the European Monetary Union (EMU). It argues that there is need for a thorough reform of the EU governance structure in conjunction with radical changes in the regulation and supervision of financial markets. The EMU was sub-optimal from its debut and competitiveness gaps did not diminish against the backdrop of its inadequate policy and institutional design. The euro zone crisis is not related to fiscal negligence only; over-borrowing by the private sector and poor lending by banks, as well as a one-sided monetary policy also explain this debacle. The EMU needs to complement its common monetary policy with solid fiscal/budget underpinnings. Fiscal rules and sanctions are necessary, but not sufficient. A common treasury (a federal budget) is needed in order to help the EMU absorb shocks and forestall confidence crises. A joint system of regulation and supervision of financial markets should operate. Emergency measures have to be comprehensive and acknowledge the necessity of a lender of last resort; they have to combat vicious circles. Structural reforms and EMU level policies are needed to enhance competitiveness in various countries and foster convergence.
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    Revisiting Euro Area accession terms : fiscal rectitude is not sufficient!
    (Akademiai Kiado, 2019-01-01) Dăianu, Daniel
    This paper argues that there are conditions for successful euro area (EA) accession, apart from fiscal rectitude. One is an ex ante critical mass of real convergence which should enhance lasting nominal convergence. Another condition is an overhaul of EA mechanisms and policies that should make it a properly functioning monetary union, which implies an adequate mix between risk-reduction and risk-sharing. It is argued that risk-sharing cannot be secured by private sector arrangements only. Entering the ERM2 is deemed to be no less demanding than euro area accession per se, especially for countries that use flexible exchange rate regimes. The paper examines also the influence of production (value) chains on the efficacy of autonomous monetary and exchange rate policies when it comes to controlling external imbalances; macro-prudential policies, too, are highlighted in this regard. Steady productivity gains are a must for surmounting the middle income trap and achieving sustainable real convergence.
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    Romania's Euro Area accession : the question is under what terms!
    (European Institute of Romania, 2017-12) Dăianu, Daniel; Kallai, Ella; Mihailovici, Gabriela; Socol, Aura
    Euro area (EA) accession should mainly depend on the achievement of a critical mass of real and structural convergence, which should diminish the risks to operate in an incomplete monetary union. Accession would also be enhanced by reforms in the functioning of euro area institutions and policies which should deal with asymmetric shocks. We argue that the true stake of euro adoption in Romania should be neither “if’’ nor “when”, but “under what terms” and “how it will be done”. The essential prerequisite for real convergence is raising competitiveness. Our analysis shows common problems regarding competitiveness in new member states in terms of infrastructure, institutional development, business sophistication, innovation; it points out the scale of risks attached to a premature euro area accession. This accession does not require the achievement of the euro area average level of GDP/capita (in PPP terms). As we argue, one can imagine Romania’s accession after having achieved a minimum of 75% of euro area GDP/capita average and the fulfilment of a series of structural conditions against the backdrop of euro area reforms.
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    When policies fuel economic cycles
    (Institute for Economic Forecasting, 2017-03) Dăianu, Daniel
    The Great Recession has brought back into the limelight the issue of cycles, of policies which fuel, or mitigate crises. There is a specter of much lower economic growth in the industrialized world. Central banks are over-burdened. This makes central bankers’ life much more complicated and obfuscates the borders between monetary policy and fiscal policy, especially when financial stability gets to center stage. New systemic risks show up in capital markets. The Eurozone has escaped collapse owing to ECB’s extraordinary operations and large macro-imbalance corrections in its periphery, but major threats persist. This paper focuses on economic cycles and policies in an international (European) context. The financial cycle is a key concept in the logic of this paper. The experience of European emerging economies is taken into account. Attention is paid to linkages between domestic cycles and financial cycles, drivers of financial cycles, finance deregulation and systemic risks, ultra low interest rates, the international policy regime and global stability.
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    Which way Goes Romanian Capitalism? - making a case for reforms, inclusive institutions and a better functioning European Union
    (European Institute of Romania, 2013-12) Dăianu, Daniel; Murgescu, Bogdan
    This paper examines the Romanian economy and its version of capitalism from a long-term perspective and in a broad context. It focuses on economic prospects in the face of a legacy of backwardness and the endurance of domestic weaknesses, in the context of the Great Recession and the eurozone crisis. Romania has a pressing need to mobilise its internal resources and absorb EU funds on a much greater scale so that it can enhance economic growth and mitigate external shocks. To this end, Romania needs to undertake thorough reforms in the public sector, combat rent-seeking and waste, foster domestic savings. The functioning of institutions and of taxation should convey a sense of fairness to citizens. Romania needs to rethink its growth model. Romania must improve its education system by increasing the level of resources assigned to education and creating coherent policies to strengthen institutional capacities and to improve quality standards. The Romanian economy would benefit significantly from EU policies that are more responsive to the economic and social fractures revealed by the current crisis. Not least, financial markets have to be tamed in Europe and elsewhere if they are to serve economies.