MONETARY POLICY REGIMES: FUNCTIONAL FRAMEWORK AND IMPLICATIONS

The contribution of this paper is the delineation of the concept of the “monetary regime”, which implies specification of a numerical target that commits the central bank to achieve the primary goal of the monetary policy. We considered that the monetary policy regimes represent an attempt to develop a proper framework of the monetary reaction function based on the different theoretical approaches of monetary transmission channels, from the practical point of view (Barro R., 1995; McCallum B., et al. 1999). The dynamics of the targeted indicator may serve also as an early shock indicator and provide a better foundation for policy-makers decisions. In this paper we propose to investigate the fundamental basis of different monetary policy regimes, a greater emphasis being put on the functional mechanism of each regime and its effects.