Macroeconomic Regimes, Policies, and Outcomes in the World
Authors
Schmidt-Hebbel, KlausPublisher
Universidad de Alcalá. Instituto de Estudios Latinoamericanos (IELAT)
Date
2011-01Bibliographic citation
Documentos de trabajo. IELAT-Instituto de Estuidos Norteamericanos, Universidad de Alcalá, Nº22 (ene.2011)
Keywords
Macroeconomic Regimes
Macroeconomic Policies
Inflation
Growth
Document type
info:eu-repo/semantics/workingPaper
Access rights
info:eu-repo/semantics/openAccess
Abstract
This paper summarizes a research project focused on the empirical determinants of
and interrelations between macroeconomic regimes, policies, and performance in the
world. The project’s hypotheses are structured into three related themes. The first aim
is analyzing the determinants of the likelihood of adoption of macroeconomic policy
regimes. The second project theme focuses on cyclicality of macroeconomic policies
and accuracy in attaining inflation targets. Finally, the project tests for the behavior of
two key macroeconomic variables - economic growth and inflation – focusing on their
sensitivity to different macroeconomic regimes and policies. A large world database
was assembled for this project from both publicly available and private databases.
Data coverage extends to more than 100 countries, with annual time series extending
from 1970 to 2008. A wide spectrum of frontier estimation techniques is applied to the
country panel data series, appropriate for discrete-choice and continuous variable
estimation. The key research results are the following. Country choice of
macroeconomic policy regimes (exchange-rate regimes, money-based targeting,
inflation targeting, and rule-based fiscal regimes) is explained by countries’ structural
and institutional features, macroeconomic performance, financial development, and
international integration. The cyclical behavior of fiscal policy reflects the quality of
country institutions, financial openness, and financial development. Central bank
accuracy in meeting inflation targets is also a result of domestic institutional strength
and macroeconomic credibility. Long-term growth is significantly shaped by the quality
of policies, financial development, foreign aid, and exchange-rate misalignment, in
addition to standard growth determinants. Growth volatility is a result of domestic
macroeconomic policy volatility, external shocks, international integration, and
financial development. Country inflation rates are determined by international factors
and domestic determinants, including fiscal policy, institutional development,
monetary and exchange-rate regimes, and financial depth and integration.
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