Macroeconomic performance of countries across monetary policy regimes from 2000 to 2017

Abstract

The goal of the article is to compare macroeconomic performance of 27 advanced and emerging OECD countries through the lens of their monetary policy frameworks. We find no advantage of the euro area countries and countries whose central banks follow a dual mandate in inflation and output stabilisation as compared to full-fledged inflation targeters including strongly inflationaverse central banks. The study contributes to the unresolved discussion on optimal monetary policy after the Great Recession. The novelty relies on employing a synthetic median-based measure adjusted for initial macroeconomic conditions. The failure to account for the initial conditions leads to underestimation of performance of countries with an originally unfavourable economic situation. We verify the results with panel data models using macroeconomic variables of key importance for monetary policy after the Great Recession. Overall, the study suggests that assigning a special role to money or output in a monetary policy strategy is not required for successful macroeconomic performance.

Inflation targeting, exchange rate and output gap in Central and Eastern European countries

“…This corresponds with the recent international evidence in favour of inflation targeting for both emerging and industrial economies, in the context of shock absorbing properties (Fratscher, Grosse-Steffen and Rieth, 2020), favourable conditions for capital inflows (Mollick, Torres and Carneiro, 2011), and stability of the banking system in countries with average quality of institutions (Fazio et al, 2018). However, there are empirical studies showing a very weak or non-existent support for inflation targeting (Petreski, 2014;Ryczkowski and Ręklewski, 2021). Among several disadvantages of inflation targeting, unfavourable output effects, inability to influence inflation expectations and ignorance of exchange rate levels are frequently mentioned (Ayres, Belasen and Kutan, 2014).…”