Comparing Constraints to Economic Stabilization in Macedonia and Slovakia : Macro Estimates with Micro Narratives

This paper 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, typ...

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Main Authors: Melecky, Martin, Najdov, Evgenij
Format: Policy Research Working Paper
Language:English
Published: World Bank, Washington, DC 2012
Subjects:
GDP
Online Access:http://documents.worldbank.org/curated/en/2008/08/9762228/comparing-constraints-economic-stabilization-macedonia-slovakia-macro-estimates-micro-narratives
http://hdl.handle.net/10986/6796
id okr-10986-6796
recordtype oai_dc
repository_type Digital Repository
institution_category Foreign Institution
institution Digital Repositories
building World Bank Open Knowledge Repository
collection World Bank
language English
topic ADVERSE EFFECTS
AGGREGATE DEMAND
AGGREGATE SUPPLY
ARBITRAGE
BANKING SECTOR
BANKING SECTORS
BENCHMARK
BENCHMARKING
BILATERAL EXCHANGE RATES
BILL
CAPACITY CONSTRAINTS
CAPITAL FLOWS
CAPITAL GOODS
CAPITAL MARKET
CAPITAL MARKET DEVELOPMENT
CAPITAL MARKETS
CAPITAL STOCK
CENTRAL BANK
COMPETITION POLICY
COMPETITIVENESS
CONSOLIDATION
CONSUMERS
CONSUMPTION GOODS
CONSUMPTION SMOOTHING
CORNER SOLUTIONS
CORRELATION COEFFICIENTS
COVARIANCE MATRIX
CURRENCY APPRECIATION
DEBT
DEFLATION
DEPENDENT VARIABLE
DEPOSIT
DEPOSITS
DEPRECIATION
DEVALUATION
DISPOSABLE INCOMES
DOMESTIC CREDIT
DOMESTIC CURRENCY
DOMESTIC CURRENCY PRICE
DOMESTIC DEMAND
DOMESTIC ECONOMIC ACTIVITY
DOMESTIC ECONOMY
DOMESTIC INTEREST RATE
DOMESTIC INTEREST RATES
DOMESTIC MARKET
DUMMY VARIABLE
ECONOMETRIC ANALYSIS
ECONOMIC ENVIRONMENT
ECONOMIC GROWTH
ECONOMIC POLICY
ECONOMIES OF SCALE
EFFECTIVE EXCHANGE RATES
ELASTICITY
ELASTICITY OF OUTPUT
ENDOGENOUS VARIABLE
EQUILIBRIUM
EXCESS CAPACITY
EXCESS DEMAND
EXCHANGE RATE
EXCHANGE RATE ANCHOR
EXCHANGE RATE CHANNEL
EXCHANGE RATE INCREASE
EXCHANGE RATE PEG
EXCHANGE RATE RISK
EXCHANGE RATE SHOCKS
EXCHANGE RATE TARGETING
EXPECTED VALUE
EXPLANATORY VARIABLES
EXPORT DIVERSIFICATION
EXTERNAL POSITION
EXTERNAL SHOCK
EXTERNAL SHOCKS
FEDERAL RESERVE
FEDERAL RESERVE BANK
FINANCIAL INSTITUTIONS
FINANCIAL INSTRUMENTS
FINANCIAL INTERMEDIATION
FINANCIAL MARKETS
FINANCIAL SECTOR
FISCAL POLICIES
FISCAL POLICY
FISCAL SHOCK
FISCAL SHOCKS
FIXED EXCHANGE RATE
FIXED EXCHANGE RATE REGIME
FIXED EXCHANGE RATE REGIMES
FLEXIBLE EXCHANGE RATE
FLEXIBLE EXCHANGE RATE REGIME
FOREIGN CURRENCY
FOREIGN INFLATION
FOREIGN INTEREST
FOREIGN INTEREST RATE
FOREIGN REAL INTEREST RATE
FUTURE INFLATION
GDP
GOVERNMENT BONDS
GOVERNMENT EXPENDITURES
GOVERNMENT INVESTMENT
GOVERNMENT POLICIES
GOVERNMENT POLICY
GOVERNMENT SECURITIES
GROWTH POLICIES
IMPORT
IMPORT DEMAND
IMPORTS
INDEXATION
INDUSTRIAL ECONOMIES
INFLATION
INFLATION DYNAMICS
INFLATION EXPECTATIONS
INFLATION TARGETING
INFLATION TARGETING REGIMES
INSTRUMENT
INTEREST PARITY
INTEREST RATE
INTEREST RATE CHANGES
INTEREST RATES
INTEREST-RATE
INTEREST-RATE DIFFERENTIALS
INTERNATIONAL BANK
INTERNATIONAL ECONOMICS
INTERNATIONAL FINANCIAL STATISTIC
INTERNATIONAL FINANCIAL STATISTICS
INTERNATIONAL MONEY
INVESTMENT CLIMATE
INVESTMENT DEMAND
LABOR FORCE
LABOR MARKETS
LIBERALIZATION
LIQUIDITY
LIQUIDITY CONSTRAINTS
LIVING STANDARDS
LOCAL CURRENCY
MACROECONOMIC POLICIES
MACROECONOMIC STABILITY
MACROECONOMIC STABILIZATION
MARGINAL COST
MARGINAL COST OF PRODUCTION
MARGINAL COSTS
MARKET ACCESS
MAXIMUM LIKELIHOOD METHOD
MONETARY AUTHORITY
MONETARY ECONOMICS
MONETARY POLICY
MONETARY POLICY REGIME
MONETARY POLICY REGIMES
MONEY MARKET
NATIONAL BANK
NET EXPORTS
NOMINAL ANCHOR
NOMINAL EXCHANGE RATE
NOMINAL INTEREST RATE
NOMINAL WAGES
OPEN ECONOMIES
OPEN ECONOMY
OPTIMIZATION
OUTPUT GAP
OUTPUT GAPS
OUTPUT RESPONSE
PER CAPITA INCOMES
PHILLIPS CURVE
POLITICAL ECONOMY
POTENTIAL OUTPUT
POVERTY REDUCTION
PRICE COMPETITIVENESS
PRICE RIGIDITIES
PRICE STABILITY
PRODUCT MARKETS
PROFIT MARGINS
PROPERTY RIGHTS
RAPID GROWTH
RE-EXPORTS
REAL EFFECTIVE EXCHANGE RATE
REAL EXCHANGE RATE
REAL GDP
REAL INTEREST
REAL INTEREST RATE
RELATIVE PRICE
RELATIVE PRICES
REPO
REPO RATE
RISK PREMIUM
SECTOR REFORMS
STANDARD DEVIATION
STANDARD DEVIATIONS
STEADY STATE
STOCK MARKET
STOCK MARKET CAPITALIZATION
STRUCTURAL REFORMS
STRUCTURAL SHOCKS
SUPPLY SHOCKS
T-BILLS
TAX REVENUES
TOTAL EXPORTS
TRADE INTEGRATION
TRADE POLICY
TRANSITION ECONOMIES
TRANSMISSION MECHANISM
TRANSMISSION MECHANISMS
UNCERTAINTY
UNEMPLOYMENT
UNEMPLOYMENT RATE
VALUE ADDED
WEALTH
WEIGHTS
ZERO WEIGHT
spellingShingle ADVERSE EFFECTS
AGGREGATE DEMAND
AGGREGATE SUPPLY
ARBITRAGE
BANKING SECTOR
BANKING SECTORS
BENCHMARK
BENCHMARKING
BILATERAL EXCHANGE RATES
BILL
CAPACITY CONSTRAINTS
CAPITAL FLOWS
CAPITAL GOODS
CAPITAL MARKET
CAPITAL MARKET DEVELOPMENT
CAPITAL MARKETS
CAPITAL STOCK
CENTRAL BANK
COMPETITION POLICY
COMPETITIVENESS
CONSOLIDATION
CONSUMERS
CONSUMPTION GOODS
CONSUMPTION SMOOTHING
CORNER SOLUTIONS
CORRELATION COEFFICIENTS
COVARIANCE MATRIX
CURRENCY APPRECIATION
DEBT
DEFLATION
DEPENDENT VARIABLE
DEPOSIT
DEPOSITS
DEPRECIATION
DEVALUATION
DISPOSABLE INCOMES
DOMESTIC CREDIT
DOMESTIC CURRENCY
DOMESTIC CURRENCY PRICE
DOMESTIC DEMAND
DOMESTIC ECONOMIC ACTIVITY
DOMESTIC ECONOMY
DOMESTIC INTEREST RATE
DOMESTIC INTEREST RATES
DOMESTIC MARKET
DUMMY VARIABLE
ECONOMETRIC ANALYSIS
ECONOMIC ENVIRONMENT
ECONOMIC GROWTH
ECONOMIC POLICY
ECONOMIES OF SCALE
EFFECTIVE EXCHANGE RATES
ELASTICITY
ELASTICITY OF OUTPUT
ENDOGENOUS VARIABLE
EQUILIBRIUM
EXCESS CAPACITY
EXCESS DEMAND
EXCHANGE RATE
EXCHANGE RATE ANCHOR
EXCHANGE RATE CHANNEL
EXCHANGE RATE INCREASE
EXCHANGE RATE PEG
EXCHANGE RATE RISK
EXCHANGE RATE SHOCKS
EXCHANGE RATE TARGETING
EXPECTED VALUE
EXPLANATORY VARIABLES
EXPORT DIVERSIFICATION
EXTERNAL POSITION
EXTERNAL SHOCK
EXTERNAL SHOCKS
FEDERAL RESERVE
FEDERAL RESERVE BANK
FINANCIAL INSTITUTIONS
FINANCIAL INSTRUMENTS
FINANCIAL INTERMEDIATION
FINANCIAL MARKETS
FINANCIAL SECTOR
FISCAL POLICIES
FISCAL POLICY
FISCAL SHOCK
FISCAL SHOCKS
FIXED EXCHANGE RATE
FIXED EXCHANGE RATE REGIME
FIXED EXCHANGE RATE REGIMES
FLEXIBLE EXCHANGE RATE
FLEXIBLE EXCHANGE RATE REGIME
FOREIGN CURRENCY
FOREIGN INFLATION
FOREIGN INTEREST
FOREIGN INTEREST RATE
FOREIGN REAL INTEREST RATE
FUTURE INFLATION
GDP
GOVERNMENT BONDS
GOVERNMENT EXPENDITURES
GOVERNMENT INVESTMENT
GOVERNMENT POLICIES
GOVERNMENT POLICY
GOVERNMENT SECURITIES
GROWTH POLICIES
IMPORT
IMPORT DEMAND
IMPORTS
INDEXATION
INDUSTRIAL ECONOMIES
INFLATION
INFLATION DYNAMICS
INFLATION EXPECTATIONS
INFLATION TARGETING
INFLATION TARGETING REGIMES
INSTRUMENT
INTEREST PARITY
INTEREST RATE
INTEREST RATE CHANGES
INTEREST RATES
INTEREST-RATE
INTEREST-RATE DIFFERENTIALS
INTERNATIONAL BANK
INTERNATIONAL ECONOMICS
INTERNATIONAL FINANCIAL STATISTIC
INTERNATIONAL FINANCIAL STATISTICS
INTERNATIONAL MONEY
INVESTMENT CLIMATE
INVESTMENT DEMAND
LABOR FORCE
LABOR MARKETS
LIBERALIZATION
LIQUIDITY
LIQUIDITY CONSTRAINTS
LIVING STANDARDS
LOCAL CURRENCY
MACROECONOMIC POLICIES
MACROECONOMIC STABILITY
MACROECONOMIC STABILIZATION
MARGINAL COST
MARGINAL COST OF PRODUCTION
MARGINAL COSTS
MARKET ACCESS
MAXIMUM LIKELIHOOD METHOD
MONETARY AUTHORITY
MONETARY ECONOMICS
MONETARY POLICY
MONETARY POLICY REGIME
MONETARY POLICY REGIMES
MONEY MARKET
NATIONAL BANK
NET EXPORTS
NOMINAL ANCHOR
NOMINAL EXCHANGE RATE
NOMINAL INTEREST RATE
NOMINAL WAGES
OPEN ECONOMIES
OPEN ECONOMY
OPTIMIZATION
OUTPUT GAP
OUTPUT GAPS
OUTPUT RESPONSE
PER CAPITA INCOMES
PHILLIPS CURVE
POLITICAL ECONOMY
POTENTIAL OUTPUT
POVERTY REDUCTION
PRICE COMPETITIVENESS
PRICE RIGIDITIES
PRICE STABILITY
PRODUCT MARKETS
PROFIT MARGINS
PROPERTY RIGHTS
RAPID GROWTH
RE-EXPORTS
REAL EFFECTIVE EXCHANGE RATE
REAL EXCHANGE RATE
REAL GDP
REAL INTEREST
REAL INTEREST RATE
RELATIVE PRICE
RELATIVE PRICES
REPO
REPO RATE
RISK PREMIUM
SECTOR REFORMS
STANDARD DEVIATION
STANDARD DEVIATIONS
STEADY STATE
STOCK MARKET
STOCK MARKET CAPITALIZATION
STRUCTURAL REFORMS
STRUCTURAL SHOCKS
SUPPLY SHOCKS
T-BILLS
TAX REVENUES
TOTAL EXPORTS
TRADE INTEGRATION
TRADE POLICY
TRANSITION ECONOMIES
TRANSMISSION MECHANISM
TRANSMISSION MECHANISMS
UNCERTAINTY
UNEMPLOYMENT
UNEMPLOYMENT RATE
VALUE ADDED
WEALTH
WEIGHTS
ZERO WEIGHT
Melecky, Martin
Najdov, Evgenij
Comparing Constraints to Economic Stabilization in Macedonia and Slovakia : Macro Estimates with Micro Narratives
geographic_facet Europe and Central Asia
Slovak Republic
Macedonia, former Yugoslav Republic of
North Macedonia (Formerly the Former Yugoslav Republic of Macedonia)
relation Policy Research Working Paper No. 4691
description This paper 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, the authors find that Macedonia has relatively weaker transmission mechanisms of monetary policy, higher output rigidity, and 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 greater 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 Publications & Research :: Policy Research Working Paper
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 : Macro Estimates with Micro Narratives
title_short Comparing Constraints to Economic Stabilization in Macedonia and Slovakia : Macro Estimates with Micro Narratives
title_full Comparing Constraints to Economic Stabilization in Macedonia and Slovakia : Macro Estimates with Micro Narratives
title_fullStr Comparing Constraints to Economic Stabilization in Macedonia and Slovakia : Macro Estimates with Micro Narratives
title_full_unstemmed Comparing Constraints to Economic Stabilization in Macedonia and Slovakia : Macro Estimates with Micro Narratives
title_sort comparing constraints to economic stabilization in macedonia and slovakia : macro estimates with micro narratives
publisher World Bank, Washington, DC
publishDate 2012
url http://documents.worldbank.org/curated/en/2008/08/9762228/comparing-constraints-economic-stabilization-macedonia-slovakia-macro-estimates-micro-narratives
http://hdl.handle.net/10986/6796
_version_ 1764401106907037696
spelling okr-10986-67962021-04-23T14:02:32Z Comparing Constraints to Economic Stabilization in Macedonia and Slovakia : Macro Estimates with Micro Narratives Melecky, Martin Najdov, Evgenij ADVERSE EFFECTS AGGREGATE DEMAND AGGREGATE SUPPLY ARBITRAGE BANKING SECTOR BANKING SECTORS BENCHMARK BENCHMARKING BILATERAL EXCHANGE RATES BILL CAPACITY CONSTRAINTS CAPITAL FLOWS CAPITAL GOODS CAPITAL MARKET CAPITAL MARKET DEVELOPMENT CAPITAL MARKETS CAPITAL STOCK CENTRAL BANK COMPETITION POLICY COMPETITIVENESS CONSOLIDATION CONSUMERS CONSUMPTION GOODS CONSUMPTION SMOOTHING CORNER SOLUTIONS CORRELATION COEFFICIENTS COVARIANCE MATRIX CURRENCY APPRECIATION DEBT DEFLATION DEPENDENT VARIABLE DEPOSIT DEPOSITS DEPRECIATION DEVALUATION DISPOSABLE INCOMES DOMESTIC CREDIT DOMESTIC CURRENCY DOMESTIC CURRENCY PRICE DOMESTIC DEMAND DOMESTIC ECONOMIC ACTIVITY DOMESTIC ECONOMY DOMESTIC INTEREST RATE DOMESTIC INTEREST RATES DOMESTIC MARKET DUMMY VARIABLE ECONOMETRIC ANALYSIS ECONOMIC ENVIRONMENT ECONOMIC GROWTH ECONOMIC POLICY ECONOMIES OF SCALE EFFECTIVE EXCHANGE RATES ELASTICITY ELASTICITY OF OUTPUT ENDOGENOUS VARIABLE EQUILIBRIUM EXCESS CAPACITY EXCESS DEMAND EXCHANGE RATE EXCHANGE RATE ANCHOR EXCHANGE RATE CHANNEL EXCHANGE RATE INCREASE EXCHANGE RATE PEG EXCHANGE RATE RISK EXCHANGE RATE SHOCKS EXCHANGE RATE TARGETING EXPECTED VALUE EXPLANATORY VARIABLES EXPORT DIVERSIFICATION EXTERNAL POSITION EXTERNAL SHOCK EXTERNAL SHOCKS FEDERAL RESERVE FEDERAL RESERVE BANK FINANCIAL INSTITUTIONS FINANCIAL INSTRUMENTS FINANCIAL INTERMEDIATION FINANCIAL MARKETS FINANCIAL SECTOR FISCAL POLICIES FISCAL POLICY FISCAL SHOCK FISCAL SHOCKS FIXED EXCHANGE RATE FIXED EXCHANGE RATE REGIME FIXED EXCHANGE RATE REGIMES FLEXIBLE EXCHANGE RATE FLEXIBLE EXCHANGE RATE REGIME FOREIGN CURRENCY FOREIGN INFLATION FOREIGN INTEREST FOREIGN INTEREST RATE FOREIGN REAL INTEREST RATE FUTURE INFLATION GDP GOVERNMENT BONDS GOVERNMENT EXPENDITURES GOVERNMENT INVESTMENT GOVERNMENT POLICIES GOVERNMENT POLICY GOVERNMENT SECURITIES GROWTH POLICIES IMPORT IMPORT DEMAND IMPORTS INDEXATION INDUSTRIAL ECONOMIES INFLATION INFLATION DYNAMICS INFLATION EXPECTATIONS INFLATION TARGETING INFLATION TARGETING REGIMES INSTRUMENT INTEREST PARITY INTEREST RATE INTEREST RATE CHANGES INTEREST RATES INTEREST-RATE INTEREST-RATE DIFFERENTIALS INTERNATIONAL BANK INTERNATIONAL ECONOMICS INTERNATIONAL FINANCIAL STATISTIC INTERNATIONAL FINANCIAL STATISTICS INTERNATIONAL MONEY INVESTMENT CLIMATE INVESTMENT DEMAND LABOR FORCE LABOR MARKETS LIBERALIZATION LIQUIDITY LIQUIDITY CONSTRAINTS LIVING STANDARDS LOCAL CURRENCY MACROECONOMIC POLICIES MACROECONOMIC STABILITY MACROECONOMIC STABILIZATION MARGINAL COST MARGINAL COST OF PRODUCTION MARGINAL COSTS MARKET ACCESS MAXIMUM LIKELIHOOD METHOD MONETARY AUTHORITY MONETARY ECONOMICS MONETARY POLICY MONETARY POLICY REGIME MONETARY POLICY REGIMES MONEY MARKET NATIONAL BANK NET EXPORTS NOMINAL ANCHOR NOMINAL EXCHANGE RATE NOMINAL INTEREST RATE NOMINAL WAGES OPEN ECONOMIES OPEN ECONOMY OPTIMIZATION OUTPUT GAP OUTPUT GAPS OUTPUT RESPONSE PER CAPITA INCOMES PHILLIPS CURVE POLITICAL ECONOMY POTENTIAL OUTPUT POVERTY REDUCTION PRICE COMPETITIVENESS PRICE RIGIDITIES PRICE STABILITY PRODUCT MARKETS PROFIT MARGINS PROPERTY RIGHTS RAPID GROWTH RE-EXPORTS REAL EFFECTIVE EXCHANGE RATE REAL EXCHANGE RATE REAL GDP REAL INTEREST REAL INTEREST RATE RELATIVE PRICE RELATIVE PRICES REPO REPO RATE RISK PREMIUM SECTOR REFORMS STANDARD DEVIATION STANDARD DEVIATIONS STEADY STATE STOCK MARKET STOCK MARKET CAPITALIZATION STRUCTURAL REFORMS STRUCTURAL SHOCKS SUPPLY SHOCKS T-BILLS TAX REVENUES TOTAL EXPORTS TRADE INTEGRATION TRADE POLICY TRANSITION ECONOMIES TRANSMISSION MECHANISM TRANSMISSION MECHANISMS UNCERTAINTY UNEMPLOYMENT UNEMPLOYMENT RATE VALUE ADDED WEALTH WEIGHTS ZERO WEIGHT This paper 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, the authors find that Macedonia has relatively weaker transmission mechanisms of monetary policy, higher output rigidity, and 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 greater 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. 2012-05-31T20:19:40Z 2012-05-31T20:19:40Z 2008-08 http://documents.worldbank.org/curated/en/2008/08/9762228/comparing-constraints-economic-stabilization-macedonia-slovakia-macro-estimates-micro-narratives http://hdl.handle.net/10986/6796 English Policy Research Working Paper No. 4691 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research Europe and Central Asia Slovak Republic Macedonia, former Yugoslav Republic of North Macedonia (Formerly the Former Yugoslav Republic of Macedonia)