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Inflation-Targeting, Flexible Exchange Rates and Macroeconomic Performance since the Great Recession. CEPS Working Document No. 394, March 2014

Andersen, Thomas Barnebeck and Malchow-Møller, Nikolaj and Nordvig, Jens (2014) Inflation-Targeting, Flexible Exchange Rates and Macroeconomic Performance since the Great Recession. CEPS Working Document No. 394, March 2014. [Working Paper]

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    Abstract

    Has inflation targeting (IT) conferred benefits in terms of economic growth on countries that followed this particular monetary policy strategy during the crisis period 2007-12? This paper answers this question in the affirmative. Countries with an IT monetary regime with flexible exchange rates weathered the crisis much better than countries with other monetary regimes, predominantly countries with fixed exchange rates. Part of this difference in growth performance reflects differences in export performance during the initial years of the crisis, which in turn can be explained by real exchange rate depreciations. However, IT seems also to confer other benefits on the countries above and beyond the effects from currency depreciation.

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    Item Type: Working Paper
    Uncontrolled Keywords: Inflation targeting; flexible exchange rates; economic growth; Great Recession.
    Subjects for non-EU documents: EU policies and themes > Policies & related activities > economic and financial affairs > economic policy
    EU policies and themes > Policies & related activities > economic and financial affairs > monetary policy
    EU policies and themes > Policies & related activities > economic and financial affairs > financial crisis 2008-on/reforms/economic governance
    Subjects for EU documents: UNSPECIFIED
    EU Series and Periodicals: UNSPECIFIED
    EU Annual Reports: UNSPECIFIED
    Series: Series > Centre for European Policy Studies (Brussels) > CEPS Working Documents
    Depositing User: Phil Wilkin
    Official EU Document: No
    Language: English
    Date Deposited: 01 Apr 2014 15:03
    Number of Pages: 29
    Last Modified: 01 Apr 2014 15:03
    URI: http://aei.pitt.edu/id/eprint/50256

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