It has been widely acknowledged that Bulgaria’s macroeconomic performance has changed dramatically since 1997. Macroeconomic and financial stability have been restored and economic activity started to recover; inflation was brought down to single-digit numbers, real incomes have been rising and the chronic fiscal gap has been closed. A CBA is an extremely rigid macroeconomic regime which hardens macro-budget constraints as it eliminates direct central bank credits to finance the budget deficit. It also hardens micro- budget constraints, in the first place in the banking system, as the central bank can no longer engage in refinancing commercial banks. However, so far.
