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Surprising Similarities: Recent Monetary Regimes of Small Economies

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

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Surprising Similarities: Recent Monetary Regimes of Small Economies

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

  2. 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

  3. 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

  4. 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

  5. Rose: Monetary Regime Similarities

  6. 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

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