| dc.description.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 aresult 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. | |
