GROWTH DESIGN AND MONETARY POLICY AFTER THE CRISIS
GROWTH DESIGN AND MONETARY POLICY AFTER THE CRISIS

Author(s): Rustam Jamilov
Subject(s): Economy, National Economy, Business Economy / Management
Published by: ASERS Publishing
Keywords: economic growth; monetary policy; global financial crisis
Summary/Abstract: Despite the indisputable fact that the 2008 Global Financial Crisis, the continuous debt overhang, and the everlasting Eurozone problem, constituted the most substantial economic downturn since the Great Depression, this slowdown has not necessarily been equally destructive for all parts of the world. This chapter proposes a case study of four relatively small and open economies which differ in their respective growth design. In each of the four economies growth has been historically heavily financed either by natural resources, influx of foreign investments, external debt, or exportation. Azerbaijan has been chosen to represent the “resource-driven”, Singapore – “investment-driven”, Hungary – “debt-driven”, and Switzerland –“export-driven” model of economic development. A supposedly very broad narrative converges naturally into just a few main talking points. Narrowly designed economic models leave nations dangerously dependent on their respective key factors of growth. Under systemic negative shocks, the factor of dependence impedes policy making and contributes to multiple structural problems that prevent sustainable recovery. Industrial diversification appears to be the chief differentiating factor for success and at least one of the key solutions to systemic financial crises. Monetary policy often becomes restricted by the path imposed by the choice of the growth design; protection of the growth regime becomes a priority for monetary policy makers, either directly or indirectly. Exchange rate management evolves into a key instrument of monetary policy-making in small open economies under large negative external economic shocks.

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