Are Law and Inflation Related? The Example of NIC Countries

Year 2024, Volume: 9 Issue: 2, 320 - 337

Nalan Kangal , Berrak Tekgün

Abstract

The level of law ensures the fair application of the legal framework, while high inflation reduces purchasing power and slows down economic growth, increasing uncertainty. Therefore, the relationship between the rule of law and inflation is important for welfare and economic stability. The aim of the study is to determine the long-term and short-term effects of the rule of law on inflation in NIC countries (Brazil, China, India, Indonesia, Malaysia, Mexico, Philippines, South Africa, Thailand and Turkey). For this purpose, the panel ARDL analysis method was applied in the study using the inflation rate, rule of law index, foreign investments and exchange rate data for the period 2000-2022. In the study findings, a statistically significant and negative relationship between the rule of law and inflation was observed in the long run. Additionally, a statistically significant and positive relationship was identified between foreign investment and inflation. In evaluating the short-term findings, only the rule of law variable was found to be statistically significant, with a positive relationship. Accordingly, the findings demonstrate the validity of the significant relationship between the rule of law and inflation in the long run for NIC countries.

Keywords

Rule of Law, NIC Countries, Panel ARDL Analysis

Hukuk ve Enflasyon İlişkili Midir? NIC Ülkeleri Örneği

Abstract

Hukuk düzeyi, yasal çerçevenin adil uygulanmasını sağlarken yüksek enflasyon ise alım gücünü düşürüp ekonomik büyümeyi yavaşlatarak belirsizliği artırmaktadır. Bu nedenle hukukun üstünlüğü ile enflasyon ilişkisi refah ve ekonomik istikrar için önemlidir. Çalışmanın amacı NIC (Brezilya, Çin, Hindistan, Endonezya, Malezya, Meksika, Filipinler, Güney Afrika, Tayland ve Türkiye) ülkelerinde hukukun üstünlüğünün enflasyon üzerindeki uzun ve kısa dönem etkilerini belirleyebilmektir. Bu amaçla çalışmada 2000-2022 dönemi enflasyon oranı, hukuk üstünlüğü endeksi, yabancı yatırımlar ve döviz kuru verileri kullanılarak panel ARDL analiz yöntemi uygulanmıştır. Çalışma bulgularında uzun dönemde; hukuk üstünlüğü ile enflasyon arasında istatistiki olarak anlamlı ve negatif ilişki elde edilmiştir. Yabancı yatırım ile enflasyon arasında ise istatistiki olarak anlamlı ve pozitif ilişki görülmektedir. Kısa dönem bulguları değerlendirildiğinde ise sadece hukuk üstünlüğü değişkeni istatistiki olarak anlamlıdır ve pozitif ilişki söz konusudur. Nitekim NIC ülkelerinde hukukun üstünlüğü ve enflasyonun uzun dönemde anlamlı ilişkinin geçerliliği ortaya konarak bulgular değerlendirilmiştir.

Keywords

Hukuk Üstünlüğü, NIC Ülkeleri, Panel ARDL Analizi

References

• Acemoglu, D., Johnson, S., Querubin, P. and Robinson, J. A. (2008). When Does Policy Reform Work? The Case of Central Bank Independence. Brookings Papers on Economic Activity, 39(1), 351-417.
• Acemoglu, D. (2012). Introduction to Economic Growth. Journal of Economic Theory, 147, 545-550.
• Baltagi, B. H. (2008). Econometric Analysis of Panel Data (Fourth Edition). West Sussex: John Wiley & Sons.
• Barro, R. (1996). Inflation and Growth. Federal Reserve Bank of St. Louis Review. 78 (3),153-169.
• Bodea, C. and R. Hicks (2014). Price Stability and Central Bank Independence: Discipline, Credibility, and Democratic Institutions. International Organization, 69(01): 35-61.
• Breusch, T.S. and Pagan, A.R. (1980). The Lagrange Multiplier Test and Its Application to Model Specifications in Econometrics. Review of Economic Studies. 47, 239-253.
• Buchanan, J.M. (1987). The Constitution of Economic Policy. The American Economic Review.77 (3), 243-250.
• Gujarati. D.N. (2004). Basic Econometrics. Fourth Edition, New York: The McGraw-Hill.
• De Hoyos, R. E. and Sarafidis, V. (2006). Testing for Cross-Sectional Dependence in Panel-Data Models. Stata Journal. 6(4), 482-496.
• Eijffinger, S. and P. Stadhouder (2003). Monetary Policy and the Rule of Law. CEPR Discussion Paper No. 3698, London: Centre for Economic Policy Research
• Hielscher, K. and G. Markwardt (2012). The Role Of Political Institutions For The Effectiveness Of Central Bank Independence. European Journal of Political Economy, 28(3), 286-301.
• Kabir, G.M.I., Fairuj, M., Montaha, S. and Uddin, M. (2023). Appraising the Impact of Rule of Law, Control of Corruption, And Govt. Effectiveness on Inflation: An Empirical Case of Bangladesh. Global Sustainability Research, 1-9.
• Kangal, N. ve Eroğlu, İ. (2023). Farklı Boyutlarıyla Özgürlük Ekonomisi: Teorik ve Politik Yaklaşım, Bursa: Ekin Yayınevi.
• Karadaş, H.A. (2021). Seçili N11 Ülkelerinde İşgücü Eğitim Seviyesinin Ekonomiye Etkisi. Makroekonomik Göstergeler Çerçevesinde N-11 Ülkeleri. Ankara: Orion Kitabevi.
• Kubar, Y., Muzoğlu, Ş. (2022). İkiz Açıklar ve Feldstein-Horioka Hipotezi: Yükselen Ekonomiler Üzerine Panel ARDL Analizi. Ekonomi Bilimleri Dergisi. 14(1): 1-22.
• Law, S. H. and Bany-Ariffin, A. N. (2008). Institutional Infrastructure and Economic Performance: Dynamic Panel Data Evidence. Transition Studies Review, 15(3): 542-557.
• Maddala, G. S., Wu, S. (1999). A Comparative Study of Unit Root Tests with Panel Data and A New Simple Test. Oxford Bulletin of Economics And Statistics. (61), 631-652.
• Narayan, P. K. and S. Narayan (2005). Estimating Income and Price Elasticities of Imports For Fiji in a Cointegration Framework, Economic Modelling. 22, 423-438.
• Neubauer, J., and Odehnal, J. (2018). ARDL Models of Military Spending and Its Security and Economic Determinants. Challenges to National Defence in Contemporary Geopolitical Situation. 1(1), 109-114.
• Nurbayev, D. (2018). The Rule of Law, Central Bank Independence And Price Stability. Journal of Institutional Economics, 14(4), 659-687.
• Pesaran, M.H., Shin, Y. and Smith, R. J. (2001). Bound Testing Approaches to the Analysis of Long Run Relationships. Journal of Applied Econometrics. special issue. 16, 289-326.
• Pesaran, M. H. (2004). General Diagnostic Test for Cross Section Dependence in Panels. IZA Discussion Paper Series, no.1240, 1-39.
• Pesaran, M., Shin, Y., Smith, R. (1999). Pooled Mean Group Estimation of Dynamic Heterogeneous Panel. Journal of the American Statistical Association. 94(446), 621-634.
• Pesaran, M.H. (2007) A Simple Panel Unit Root Test in the Presence of Cross Section Dependence. Journal of Applied Econometrics, 22, 265-312.
• Shevchuk, V., Blikhar, V., Zabzaliuk, D. and Tataryn N. (2020). The Rule Of Law And Inflation In The Middle-Income Countries. Financial And Credit Activity Problems Of Theory And Practice, 2(33), 386-399.
• Şaşmaz, M., Ü. and Sağdıç, E., N. (2020). The Effect Of Government Effectiveness And Rule Of Law On Economic Growth: The Case Of European Union Transition Economies, İşletme Fakültesi Dergisi, 21(1), 203-217.
• Şengönül, A., Karadaş, H. A. ve Koşaroğlu, Ş. M. (2018). Turizme Dayalı Büyüme Hipotezinin OECD Üyesi Olan Akdeniz Ülkeleri İçin Analizi. Journal Of International Social Research, 11(60): 1123-1135.
• Şengönül, A., Tekgün, B. (2021). Phillips Eğrisinin Panel ARDL Analizi: Türkiye’deki Bölgeler Arası Bir Uygulama. International Journal of Economics. Politics, Humanities & Social Sciences. 4(2), 81-97.
• Tatoğlu, Yerdelen, F. (2018) Panel Veri Ekonometrisi. 4. ed. İstanbul: Beta Yayıncılık.
• Yang, Y. (2012). Agglomeration Density And Tourism Development in China: An Empirical Research Based On Dynamic Panel Data Model. Tourism Management. 33, 1347-1359.
• Xu, G. (2011). The Role Of Law In Economic Growth: A Literature Review. Journal of Economic Surveys, 25(5), 883-871.