Response of Output in Romania to Macroeconomic Policies and Conditions

This paper incorporates the monetary policy function and uncovered interest parity in examining the impacts of changes in major macroeconomic variables on real GDP in Romania. A lower ratio of government consumption spending to GDP, an appreciation of the expected real effective exchange rate, a lower world real interest rate, more world output, and a lower inflation rate would raise real GDP. Hence, fiscal prudence is needed, and the conventional approach of real depreciation to stimulate exports and raise real output does not apply to Romania.