Working Paper: NBER ID: w16124
Authors: Laurence M. Ball
Abstract: This paper compares the performance of economies with different monetary regimes during the last quarter century. The conclusions include: (1) There is little evidence that inflation targeting affects performance in advanced economies, but some evidence of benefits in emerging economies; (2) Europe's monetary union has increased intra-European trade and capital flows, but divergence in national price levels may destabilize output in the future; (3) The "monetary analysis" of the European Central Bank has little effect on the ECB's policy decisions; and (4) Countries with hard currency pegs experience unusually severe recessions when capital flight occurs.
Keywords: monetary regimes; inflation targeting; euro; capital flight
JEL Codes: E42; E52; E58
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Inflation targeting (IT) (E31) | Average inflation (E31) |
| Euro adoption (F36) | Output (Y10) |
| Euro adoption (F36) | Inflation volatility (E31) |
| Euro adoption (F36) | Average interest rates (E43) |
| Hard currency pegs (F31) | Severe recessions during capital flight (F32) |