Policy Interactions in Romania: Evidence from Macroprudential, Monetary and Fiscal Dynamics

This study empirically examines the tripartite interaction between macroprudential, monetary and fiscal policy using a VAR framework combined with Granger causality and block exogeneity tests, based on quarterly data for Romania over the period 2008Q4–2025Q3. The results show an asymmetric pattern of policy interactions. First, macroprudential policy seems to be independent from short-run monetary and fiscal dynamics, as no significant Granger causality relationships are identified when using a composite macroprudential policy index that captures the overall stance of regulatory and supervisory measures. Secondly, fiscal policy, proxied by the general government budget balance expressed as a percentage of GDP, was found to Granger-cause monetary policy adjustments, suggesting that fiscal imbalances generate information relevant for subsequent monetary policy decisions. In contrast, no evidence of reverse causality from monetary, proxied by the key policy rate, to fiscal policy was detected. By jointly analyzing all three policy domains in an emerging economy, our paper addresses an important gap in the existing literature, which has largely focused on pairwise policy interactions.