I have no doubt that the outcome would have been a lot worse had we been complacent and relied entirely on the self-corrective behaviour of markets. I will give here just one example: forex interventions limited significantly exchange rate fluctuations, with the appreciation during the massive capital inflows and the depreciation after the crisis outbreak not exceeding 25 percent. In the absence of such interventions, the magnitude of fluctuations could have been as high as 40 to 60 percent. The foreign exchange purchases made before the crisis not only limited the unsustainable leu appreciation and the associated loss of export competitiveness, but supplied the ammunition for subsequent interventions to cushion the currency depreciation once the outbreak of the crisis changed the direction of the flows. And I believe this is the second benefit of the approach. Last, but not least, thinking outside the box allowed us to avoid incurring losses after 2006. While profitability should not be a concern for a central bank, this development proved very fortunate from the perspective of the political economy. On the one hand, it allowed the NBR to preserve its independence in relation to the government by not generating quasi-fiscal deficits in a period with an increasing fiscal imbalance. On the other hand, it helped preserve institutional credibility in relation to the banks subject to NBR supervision, which were closely monitored in terms of capital adequacy. Moreover, through our actions we wanted to avoid rewarding the speculative behaviour several commercial banks were engaged in (i.e.

But probably the most striking unconventional feature of our monetary policy back then was the active recourse to reserve requirements, the rates of which were increased to levels exceeding by far those of any other central bank in the EU: 20 and 40 percent for lei- and forex-denominated liabilities respectively in 2006. However, taking into account that studies published even before 2006 considered the pure IT framework as not necessarily the most suitable for an emerging economy, one might think that the NBR’s departure from the mainstream was less significant. Specifically, the NBR opted for  2  BIS central bankers’ speeches  a “light” version of inflation targeting, which meant retaining the managed float feature of the exchange rate regime, which implied smoothing out excessive volatility, without defending a certain level of the exchange rate or preannouncing interventions. The actual form inflation targeting took in Romania thus matched the “managed-floating plus” concept introduced by Goldstein in 2002, considered the most suitable choice for an emergingmarket economy involved in the global capital market, as it combines the managed float part with an inflation targeting monetary policy strategy and an active pursuit of measures to limit the degree of currency mismatches in the economy. Subsequently, this “managed-floating plus” approach gained acceptance, especially during the global crisis, and now forex interventions are part of the arsenal of many central banks, including some of those using a free floating regime before the crisis. 3. Did markets and banks react to the departure from the paradigm?