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The Macroeconomics Of A Delayed Recovery From The Global Financial Crisis: A Comparative Approach

Author

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  • THOMAS BARNEBECK ANDERSEN

    (Department of Business and Economics, University of Southern Denmark, Campusvej 55 Dk-5230 Odense M, Denmark)

  • NIKOLAJ MALCHOW-MØLLER

    (Department of Business and Economics, University of Southern Denmark, Campusvej 55 Dk-5230 Odense M, Denmark)

Abstract

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.

Suggested Citation

  • Thomas Barnebeck Andersen & Nikolaj Malchow-Møller, 2017. "The Macroeconomics Of A Delayed Recovery From The Global Financial Crisis: A Comparative Approach," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 62(05), pages 1179-1194, December.
    • Handle: RePEc:wsi:serxxx:v:62:y:2017:i:05:n:s0217590815501088
    DOI: 10.1142/S0217590815501088
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