Good luck and economic performance
Is there any correlation between the government policy and the economic performance? The answer is yes, but the policy is not alone. Sometimes the other factor such as “external shock” or “unexpected events” could affect the performance more than the policy. One of the good paper to describe this phenomenon is “U.S. Monetary Policy During the 1990s” by Mankiw (2001) described this condition as “Good Luck”, as shown below.
“…. US monetary policy during the 1990s, comparing it to policy during the previous several decades. It reaches four broad conclusions. First, the macroeconomic performance of the 1990s was exceptional, especially if judged by the volatility of growth, unemployment, and inflation. Second, much of the good performance was due to good luck arising from the supply-side of the economy: Food and energy prices were well behaved, and productivity growth experienced an unexpected acceleration. Third, monetary policymakers deserve some of the credit by making interest rates more responsive to inflation than was the case in previous periods. Fourth, although the 1990s can be viewed as an example of successful discretionary policy, Fed policymakers may have been engaged in “covert inflation targeting” at a rate of about 3 percent. The avoidance of an explicit policy rule, however, means that future policymakers inherit only a limited legacy…”
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So now, most countries need good luck, especially Indonesia to escape from this current economic crisis.
