The Empirical Approach of the Interplay of Macroeconomic Variables and the Dynamics of the Financial Market in Romania.

The complicated interplay between the Romanian BET index, monetary policy rate, inflation rate, and RON/USD currency rate is studied using a Vector Autoregression (VAR) approach in this article. The methodology is based on the VAR model's ability to explain the dynamic relationship between multiple time series, with Granger causality tests used to identify the directionality of influence, impulse response functions used to trace the effects of economic shocks and forecast error variance decomposition used to measure the extent of variable interdependence. The findings show results about the links of monetary policy rate, inflation rate, BET index and exchange rate, with the purpose to find if capital markets are sensitive to macroeconomic policy decisions. The study emphasizes the central bank's policy rate's significance in influencing market expectations, as well as the complex impact of inflationary trends on currency valuation. [ABSTRACT FROM AUTHOR]