Surprising Similarities: Recent Monetary Regimes of Small Economies

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Presentation transcript:

Surprising Similarities: Recent Monetary Regimes of Small Economies Andrew K. Rose Berkeley-Haas, CEPR and NBER

Rose: Monetary Regime Similarities Focus Q: Does monetary regime matter? My interests Recent: GFC and aftermath (2007-2012) Small Countries: Not China, EMU, Japan, UK, USA Empirical: Panel data, 170 countries Compare two extreme monetary regimes Floating with Inflation Target (>20% Global GDP) Hard Fix (<10% Global GDP) Rose: Monetary Regime Similarities

Rose: Monetary Regime Similarities Monetary Stability Few monetary regime switches recently Unexpected because: Historical counter-cyclicality Size of GFC and Great Recession Why the Stability? What’s New? Countries that Float with Inflation Targeting (Hard Fixes always around) Natural to compare (two) stable regimes Rose: Monetary Regime Similarities

Comparing Hard Fixers with Inflation Targeters Broadly Similar Outcomes Business Cycles, Capital Flows, Inflation, Trade, Current Account, Fiscal, Money, Reserves, Capital Controls, Exchange Rates, Asset Prices, … Methodologies: graphs, regressions, matching, … Implausible or Boring? Surprising: two very different monetary regimes Banal: literature since Baxter-Stockman Regimes matter for little (except exchange rate) Rose: Monetary Regime Similarities

Rose: Monetary Regime Similarities

Rose: Monetary Regime Similarities Conclusion Regime differences persist since unimportant Growth, inflation, fiscal policy, current account, reserve growth … do not vary much by regime Consistent with literature if counter-intuitive Small countries now have stable alternative to hard fix; float with inflation target Both regimes survived GFC and aftermath This monetary stability new (compare: 1930s/1970s) Cross-regime similarities, so can’t easily differentiate Rose: Monetary Regime Similarities