THE IMPACT OF THE US AND EURO AREA FINANCIAL SYSTEMIC STRESS TO THE ROMANIAN ECONOMY

This paper analyzes the transmission of financial systemic stress from the US and Euro Area to Romania. We employ recently developed composite indicators of systemic stress (CISS for the Euro Area and NFCI for the US), which reflect financial conditions from different financial sectors. The results from a time-varying Bayesian vector autoregression with stochastic volatility indicate that the degree of transmission depends significantly on the time and on the level of stress. The analysis reveals that Romania responds negatively, similarly to the developed economies, to the financial systemic stress as regards the real economy, but differently as regards the monetary policy. Finally, the results emphasize that financial interconnectedness with the Euro Area is more important than that with the US.