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Monetary policy efficiency and macroeconomic stability: Do financial openness and economic globalization matter?

Helder de Mendonça () and Natalia Cunha Nascimento

The North American Journal of Economics and Finance, 2020, vol. 51, issue C

Abstract: We provide indicators for monetary policy inefficiency and macroeconomic instability by the use of efficiency frontier approach to measure the performance of the monetary authority. In particular, based on panel data analysis which takes into account information from forty-two countries for the period 1990 to 2014, we analyze the impact of an increase in financial openness and economic globalization on both monetary policy inefficiency and macroeconomic instability. The findings denote that both financial openness and economic globalization are important tools to improve monetary policy efficiency and macroeconomic stability. Furthermore, we observe that countries with inflation targeting, higher level of development, low risk of political pressures (such as socioeconomic pressures and democratic accountability), as well as the absence of international financial crisis, have a better performance in terms of monetary policy efficiency and macroeconomic stability.

Keywords: Monetary policy efficiency; Macroeconomic stability; Financial openness; Economic globalization (search for similar items in EconPapers)
JEL-codes: E52 E58 F41 F62 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:51:y:2020:i:c:s1062940818302651

DOI: 10.1016/j.najef.2018.10.018

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