Has Monetary Policy Become More Efficient? A Cross-Country Analysis

26 Pages Posted: 8 May 2006

See all articles by Stephen G. Cecchetti

Stephen G. Cecchetti

Brandeis International Business School; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Alfonso Flores-Lagunes

Syracuse University--Economics; Syracuse University--CPR; IZA, Bonn

Stefan Krause

Banque de France - Economic Study and Research Division; Sciences Po

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Abstract

Over the past 20 years, macroeconomic performance has improved in industrialised and developing countries alike. In a broad cross-section of countries inflation volatility has fallen markedly while output variability has either fallen or risen only slightly. This increased stability can be attributed to some combination of more efficient monetary policy making, a reduction in the variability of supply shocks, and changes in the structure of the economy. We develop a method for allocating performance changes among these factors. For 21 of the 24 countries we study, more efficient monetary policy has been the driving force behind improved performance.

Suggested Citation

Cecchetti, Stephen G. and Flores-Lagunes, Alfonso and Krause, Stefan, Has Monetary Policy Become More Efficient? A Cross-Country Analysis. Economic Journal, Vol. 116, No. 115, pp. 408-433, April 2006. Available at SSRN: https://ssrn.com/abstract=894511 or http://dx.doi.org/10.1111/j.1468-0297.2006.01086.x

Stephen G. Cecchetti (Contact Author)

Brandeis International Business School ( email )

415 South Street
Waltham, MA 02453
United States

National Bureau of Economic Research (NBER) ( email )

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Cambridge, MA 02138
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Centre for Economic Policy Research (CEPR) ( email )

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United Kingdom

Alfonso Flores-Lagunes

Syracuse University--Economics ( email )

Syracuse, NY 13244-1020
United States

HOME PAGE: http://www.maxwell.syr.edu/econ/cpr/Alfonso_Flores_Lagunes/

Syracuse University--CPR ( email )

Syracuse, NY 13244
United States

HOME PAGE: http://www.maxwell.syr.edu/econ/cpr/Alfonso_Flores_Lagunes/

IZA, Bonn ( email )

P.O. Box 7240
Bonn, D-53072
Germany

HOME PAGE: http://www.iza.org/profile?key=2305

Stefan Krause

Banque de France - Economic Study and Research Division ( email )

31, rue Croix des Petits Champs
75049 Paris Cedex 01
FRANCE

Sciences Po ( email )

27 rue Saint-Guillaume
Paris Cedex 07, 75337
France

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