The impact of the recent global crisis on the prioritization of central banks final objectives. A structural approach in the context of Central and Eastern European states

This paper aims to identify the actual objectives of monetary authorities in Central and Eastern Europe (CEE) that promote an independent monetary policy. In this sense we consider the study of central banks (CBs) behavior in the Czech Republic, Poland, Romania and Hungary in establishing short-term nominal interest rate by estimating a Taylor-type monetary policy rule, with new features in terms of elements aimed at exploring the interactions between the monetary policy and financial stability. We estimate the monetary policy rule based on a dynamic stochastic general equilibrium model (DSGE). The main results revealed the strong stance of the selected monetary authorities towards their fundamental objective of price stability, but in parallel, towards stabilizing the exchange rate and real economic activity and the existence of specific elements indicating a leaning against the wind orientation of the monetary policy in countries under analysis. Following the emergence of international turmoil our analysis has identified the maintaining of a strong orientation towards the primary objective of monetary policy, a similar relative stance of monetary policy relative to the stabilization of the real activity alongside a decrease in the focus of stabilizing the exchange rate, while the accentuated focus on financial stability does not appear to be achieved through monetary policy.