THE MACROECONOMICS OF A DELAYED RECOVERY FROM THE GLOBAL FINANCIAL CRISIS: A COMPARATIVE APPROACH

摘要

This paper compares Denmark's growth performance to that of the other 18 non-Eurozone OECD economies during 2008-2013. Denmark is the only country with a fixed exchange-rate regime; all the other 18 countries have flexible exchange rates, mostly as part of an inflation-targeting (IT) framework. At the same time, Denmark is the worst growth performer of all. Our analysis indicates that the lack of monetary policy independence is central to understanding the meager Danish performance. Monetary easing during 2008-2009 is an important predictor of economic growth during 2008-2013, and Denmark, having outsourced monetary policy to the ECB, did not pursue monetary easing as aggressively as most other countries. In fact, the Danish Central Bank was forced to raise its policy interest rate in 2008Q4 in order to defend the euro-peg. Overall, the Danish experience serves as a reminder that fixed exchange rates can be quite taxing on economic growth in the aftermath of a huge negative shock.