Comparing Constraints to Economic Stabilization in Macedonia and Slovakia: Macroestimates with Micronarratives

This article re-emphasizes the link from structural policies to enhanced macroeconomic stabilization using a small structural model estimated on quarterly data for Macedonia and Slovakia over 1995-2007. The success of macroeconomic stabilization, typically in the hands of monetary policy, is not onl...

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Main Authors:	Melecky, Martin, Najdov, Evgenij
Format:	Journal Article
Language:	EN
Published:	2012
Subjects:	Macroeconomics: Production E230 Price Level Inflation Deflation E310 Business Fluctuations Cycles E320 Monetary Policy E520 Comparative or Joint Analysis of Fiscal and Monetary Policy Stabilization Policy E630 Socialist Systems and Transitional Economies: National Income, Product, and Expenditure Money Inflation P240
Online Access:	http://hdl.handle.net/10986/4767

id	okr-10986-4767
recordtype	oai_dc
spelling	okr-10986-47672021-04-23T14:02:19Z Comparing Constraints to Economic Stabilization in Macedonia and Slovakia: Macroestimates with Micronarratives Melecky, Martin Najdov, Evgenij Macroeconomics: Production E230 Price Level Inflation Deflation E310 Business Fluctuations Cycles E320 Monetary Policy E520 Comparative or Joint Analysis of Fiscal and Monetary Policy Stabilization Policy E630 Socialist Systems and Transitional Economies: National Income, Product, and Expenditure Money Inflation P240 This article re-emphasizes the link from structural policies to enhanced macroeconomic stabilization using a small structural model estimated on quarterly data for Macedonia and Slovakia over 1995-2007. The success of macroeconomic stabilization, typically in the hands of monetary policy, is not only determined by a suitable choice of the nominal anchor, which shapes the reaction function of monetary policy, but also the constraints within which the monetary policy strives to achieve its objectives. The key attributes of the constraints to macroeconomic stabilization are economic rigidities and structural shocks. By benchmarking the estimated economic rigidities and structural shocks faced by Macedonia to those faced by Slovakia, we find that Macedonia has relatively weaker transmission mechanisms of monetary policy, higher output rigidity, a lower exchange rate pass-through, and faces larger external shocks. For Macedonia, these relatively higher constraints on monetary policy together with the chosen exchange rate anchor result in higher output and inflation volatility relative to Slovakia. Hence, it appears that small open economies with stronger economic rigidities should apply monetary policy regimes that allow for more flexible adjustments in external relative prices to enhance their macroeconomic stability. 2012-03-30T07:29:38Z 2012-03-30T07:29:38Z 2010 Journal Article Applied Financial Economics 09603107 http://hdl.handle.net/10986/4767 EN http://creativecommons.org/licenses/by-nc-nd/3.0/igo World Bank Journal Article Macedonia, former Yugoslav Republic of Slovak Republic North Macedonia (Formerly the Former Yugoslav Republic of Macedonia)
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	EN
topic	Macroeconomics: Production E230 Price Level Inflation Deflation E310 Business Fluctuations Cycles E320 Monetary Policy E520 Comparative or Joint Analysis of Fiscal and Monetary Policy Stabilization Policy E630 Socialist Systems and Transitional Economies: National Income, Product, and Expenditure Money Inflation P240
spellingShingle	Macroeconomics: Production E230 Price Level Inflation Deflation E310 Business Fluctuations Cycles E320 Monetary Policy E520 Comparative or Joint Analysis of Fiscal and Monetary Policy Stabilization Policy E630 Socialist Systems and Transitional Economies: National Income, Product, and Expenditure Money Inflation P240 Melecky, Martin Najdov, Evgenij Comparing Constraints to Economic Stabilization in Macedonia and Slovakia: Macroestimates with Micronarratives
geographic_facet	Macedonia, former Yugoslav Republic of Slovak Republic North Macedonia (Formerly the Former Yugoslav Republic of Macedonia)
relation	http://creativecommons.org/licenses/by-nc-nd/3.0/igo
description	This article re-emphasizes the link from structural policies to enhanced macroeconomic stabilization using a small structural model estimated on quarterly data for Macedonia and Slovakia over 1995-2007. The success of macroeconomic stabilization, typically in the hands of monetary policy, is not only determined by a suitable choice of the nominal anchor, which shapes the reaction function of monetary policy, but also the constraints within which the monetary policy strives to achieve its objectives. The key attributes of the constraints to macroeconomic stabilization are economic rigidities and structural shocks. By benchmarking the estimated economic rigidities and structural shocks faced by Macedonia to those faced by Slovakia, we find that Macedonia has relatively weaker transmission mechanisms of monetary policy, higher output rigidity, a lower exchange rate pass-through, and faces larger external shocks. For Macedonia, these relatively higher constraints on monetary policy together with the chosen exchange rate anchor result in higher output and inflation volatility relative to Slovakia. Hence, it appears that small open economies with stronger economic rigidities should apply monetary policy regimes that allow for more flexible adjustments in external relative prices to enhance their macroeconomic stability.
format	Journal Article
author	Melecky, Martin Najdov, Evgenij
author_facet	Melecky, Martin Najdov, Evgenij
author_sort	Melecky, Martin
title	Comparing Constraints to Economic Stabilization in Macedonia and Slovakia: Macroestimates with Micronarratives
title_short	Comparing Constraints to Economic Stabilization in Macedonia and Slovakia: Macroestimates with Micronarratives
title_full	Comparing Constraints to Economic Stabilization in Macedonia and Slovakia: Macroestimates with Micronarratives
title_fullStr	Comparing Constraints to Economic Stabilization in Macedonia and Slovakia: Macroestimates with Micronarratives
title_full_unstemmed	Comparing Constraints to Economic Stabilization in Macedonia and Slovakia: Macroestimates with Micronarratives
title_sort	comparing constraints to economic stabilization in macedonia and slovakia: macroestimates with micronarratives
publishDate	2012
url	http://hdl.handle.net/10986/4767
_version_	1764392680027062272

Comparing Constraints to Economic Stabilization in Macedonia and Slovakia: Macroestimates with Micronarratives

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