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Denmark's fixed exchange rate regime and the delayed recovery from the Global Financial Crisis: A comparative macroeconomic analysis

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Abstract

This paper compares Denmark’s growth performance to that of the other 18 non-Eurozone OECD economies during 2008-12. Denmark is the only country with a fixed exchange rate regime; the other 18 countries all have flexible exchange rates, mostly as part of an inflation-targeting framework. At the same time, Denmark is one of the worst growth performers during 2008-12. Our analysis indicates that the lack of monetary policy independence is central to understanding the meager Danish performance. Aggressive monetary policy during 2008-09 is an important predictor of economic growth during 2008-12; and Denmark, having outsourced monetary policy to the ECB, did not pursue monetary easing as aggressively as most other countries. Overall, the analysis suggests that had Denmark been able to follow Sweden in aggressively cutting interest rates in the wake of the Global Financial Crisis, it would have added three quarters of a percentage point to average annual real GDP growth during 2008-12.

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  • Andersen, Thomas Barnebeck & Malchow-Møller, Nikolaj, 2014. "Denmark's fixed exchange rate regime and the delayed recovery from the Global Financial Crisis: A comparative macroeconomic analysis," Discussion Papers on Economics 10/2014, University of Southern Denmark, Department of Economics.
    • Handle: RePEc:hhs:sdueko:2014_010
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    File URL: https://www.sdu.dk/-/media/files/om_sdu/institutter/ivoe/disc_papers/disc_2014/dpbe10_2014.pdf
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    Cited by:

    1. Stan Majoor, 2015. "Urban Megaprojects in Crisis? Ørestad Copenhagen Revisited," European Planning Studies, Taylor & Francis Journals, vol. 23(12), pages 2497-2515, December.

    More about this item

    Keywords

    Exchange rate regimes; monetary policy; financial crisis; economic growth;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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