The Role of Structural Reforms on the Price and Financial Stability: Evidence from a Multi-Country PSTR Model

Yıl 2024, Cilt: 24 Sayı: 2, 149 - 164, 25.05.2024

Vedat Kaya Ömer Yalçınkaya Erhan Akkaş

https://doi.org/10.21121/eab.1108481

Öz

This paper examines the effects of structural reforms on price and financial stability through the Panel Smooth Transition Regression model for 84 developed and developing countries in the period 2002-2018. Therefore, this paper aims to determine whether it is a matter of the impact of structural reforms in the real sectors on price stability; and in financial sectors on financial stability in the sampled countries, when output is given in the PSRT models. The results show that structural reforms have a significant impact on the price and financial stability, although the regimes shaped by the value of output gap threshold, differ in the sampled countries. These results present that structural reforms can help to improve the price and financial stability to the extent that they can eliminate supply-demand imbalances, prevent systemic risks and positively affect a deterioration in expectations by supporting new monetary policy designs.

Anahtar Kelimeler

Structural Reforms, Price Stability, Financial Stability, MONA-Database, Nonlinear Panel Data Analysis, PSTR

Kaynakça

• Agnello, L., Castro, V., Jalles, J. T., & Sousa, R. M. (2015). What determines the likelihood of structural reforms? European Journal of Political Economy, 37, 129-145. doi:10.1016/j.ejpoleco.2014.10.007.
• Aksoy, T. (2019). Structural reforms and growth in developing countries. Journal of Economic Policy Reform, 22 (4), 325-350. doi:10.1080/17487870.2018.1424629.
• Albulescu, C. T. (2010). Forecasting the Romanian financial system stability using a stochastic simulation model. Romanian Journal of Economic Forecasting, 13 (1), 81-98.
• Anderson, D., Hunt, B., & Snudden, S. (2014). Fiscal consolidation in the euro area: How much pain can structural reforms ease? Journal of Policy Modeling, 36(5), 785-799. doi: 10.1016/j.jpolmod.2014.08.005.
• Annicchiarico, B., Di Dio, F., & Felici, F. (2013). Structural reforms and the potential effects on the Italian economy. Journal of Policy Modeling, 35(1), 88-109. doi: 10.1016/j.jpolmod.2012.03.002.
• Arzamasov, V., & Penikas, H. (2014). A financial stability index for Israel. Procedia Computer Science, 31, 985-994. doi: 10.1016/j.procs.2014.05.351.
• Babecky, J., & Havranek, T. (2014). Structural reforms and growth in transition: A meta‐analysis. Economics of Transition, 22(1), 13-42. doi: 10.1111/ecot.12029.
• Baltagi, B. H. (2008). Econometric analysis of panel data. 4th edition. John Wiley & Sons, West Sussex.
• Barlow, D. (2010). How did structural reform influence inflation in transition economies? Economic Systems, 34(2), 198-210. doi: 10.1016/j.ecosys.2009.10.001.
• Başçı, E., & Kara, H. (2011). Finansal istikrar ve para politikası. İktisat İşletme ve Finans, 26(302), 9-25. doi:10.3848/iif.2011.302.0925.
• Borio, C. (2014). The financial cycle and macroeconomics: What have we learnt? Journal of Banking & Finance, 45, 182-198. doi:10.1016/j.jbankfin.2013.07.031.
• Bouis, R., Causa, O., Demmou, L., Duval, R., & Zdzienicka, A. (2012). The short-term effects of structural reforms. OECD Economics Department Working Papers No. 949, 2-62. Available at: https://www.oecd-ilibrary.org/docserver/5k9csvk4d56d-en.pdf?expires=1603284423&id=id&accname=guest&checksum=E195DFBFC02E89C053F81487762B3407.
• Brancaccio, E., Garbellini, N., & Giammetti, R. (2018). Structural labour market reforms, gdp growth and the functional distribution of income. Structural Change and Economic Dynamics, 44, 34-45. doi:10.1016/j.strueco.2017.09.001.
• Campagne, B., & Poissonnier, A. (2018). Structural reforms in dsge models: Output gains but welfare losses. Economic Modelling, 75, 397-421. doi:10.1016/j.econmod.2018.07.016.
• Campos, N. F. & Horváth, R. (2012). Reform redux: Measurement, determinants and growth implications. European Journal of Political Economy, 28(2), 227-237. doi:10.1016/j.ejpoleco.2011.12.002.
• CBRT (2016). Yapısal Reformlar ve Büyüme Üzerindeki Etkileri. Türkiye Cumhuriyet Merkez Bankası. Available at: https://www.tcmb.gov.tr/wps/wcm/connect/62478b27-9dd8-4351-a979-30ed6461cf9e/TCMB2016_1.pdf?MOD=AJPERES&CACHEID=ROOTWORKSPACE-62478b27-9dd8-4351-a979-30ed6461cf9e-m5ljXaM.
• Christiansen, L., Schindler, M., & Tressel, T. (2013). Growth and structural reforms: A new assessment. Journal of International Economics, 89(2), 347-356. doi:10.1016/j.jinteco.2012.07.008.
• Cuervo-Cazurra, A., & Dau, L. A. (2009). Structural reform and firm exports. Management International Review, 49 (4), 479-507. doi:10.1007/s11575-009-0005-8.
• D’Costa, S., Garcilazo, J. E., & Oliveira Martins, J. (2019). Impact of macro‐structural reforms on the productivity growth of regions: Distance to the frontier matters. Papers in Regional Science, 98(1), 133-166. doi:10.1111/pirs.12346.
• De Almeida, L. A., & Balasundharam, V. (2018). On the impact of structural reforms on output and employment: Evidence from a cross-country firm-level analysis. International Monetary Fund, 2018. IMF Working Paper, WP/18/73, 1-35. Avaialble at: https://www.imf.org/en/Publications/WP/Issues/2018/04/06/On-the-Impact-of-Structural-Reforms-on-Output-and-Employment-Evidence-from-a-Cross-country-45786.
• De Grauwe, P., & Ji, Y. (2020). Structural reforms, animal spirits, and monetary policies. European Economic Review, 124, 103395, 1-29. doi:10.1016/j.euroecorev.2020.103395.
• De Haan, J., & Parlevliet, J. (2018). Structural reforms: An intrdoduction. In: De Haan, J., Parlevliet, J. (Ed.). Structural reforms: Moving the economy forward (pp. 1-20). Springer International Publishing AG.
• Duarte, R., Pinilla, V., Serrano, A., 2013. Is there an environmental Kuznets curve for water use? A panel smooth transition regression approach. Economic Modelling, 31, 518-527. doi:10.1016/j.econmod.2012.12.010.
• EBRD (2010). Transition Report 2010: Recovery and Reform. European Bank for Reconstruction and Development, (pp 1-163). Available at: https://www.ebrd.com/downloads/research/transition/tr10.pdf.
• Égert, B., & Gal, P. (2018). The Quantification of the Effects of Structural Reforms in OECD Countries. In: De Haan, J., Parlevliet, J. (Ed.). Structural Reforms: Moving the Economy Forward (pp. 38-60). Springer International Publishing AG.
• Fischer, K., & Stiglbauer, A. (2018). Structural reforms for higher productivity and growth. Monetary Policy and the Economy, Q2/18, 132-152.
• Fouejieu, A. (2017). Inflation targeting and financial stability in emerging markets. Economic Modelling, 60, 51-70. doi:10.1016/j.econmod.2016.08.020.
• Fouquau, J., Hurlin, C., & Rabaud, I. (2008). The Feldstein-Horioka puzzle: A panel smooth transition regression approach. Economic Modelling, 25, 284–299. doi:10.1016/j.econmod.2007.06.008.
• GFDR (2020). Global Financial Development Report 2019-2020: Bank Regulation and Supervision a Decade after the Global Financial Crisis, The World Bank Group, 2020. Available at: https://openknowledge.worldbank.org/handle/10986/32595.
• Gomes, S. (2018). Euro area structural reforms in times of a global crisis. Journal of Macroeconomics, 55, 28-45. doi:10.1016/j.jmacro.2017.08.003.
• Gonzalez, A., Terasvirta, T., & Van Dijk, D. (2005). Panel smooth transition regression models. SSE/EFI Working Paper Series in Economics and Finance, WP No. 604, Stockholm.
• Hamilton, J. (2017). Why you should never use the Hodrick-Prescott filter. NBER Working Paper, No: 23429. Hansen, B.E. (1999). Threshold effects in non-dynamic panels: estimation, testing, and inference. Journal of Econometrics, 93, 345–368. doi:10.1016/S0304-4076(99)00025-1.
• IMF (2015). Structural Reforms And Macroeconomic Performance: Initial Considerations For The Fund. IMF, 1-62. Available at: http://www.imf.org/external/pp/ppindex.aspx.
• IMF (2008). Structural Reforms and Economic Performance in Advanced and Developing Countries. IMF, 1-49. Available at: https://www.imf.org/external/np/res/docs/2008/pdf/061008.pdf.
• IMF-MONA (2020). Monitoring of Fund Arrangements, MONA Database. Available at: https://www.imf.org/external/np/pdr/mona/index.aspx.
• Karanovic, G., & Karanovic, B. (2015). Developing an aggregate index for measuring financial stability in the Balkans. Procedia Economics and Finance 33, 3-17. doi:10.1016/S2212-5671(15)01690-1.
• Kinoshita, Y., & Campos, N. F. (2008). Foreign Direct Investment and Structural Reforms: Evidence from Eastern Europe and Latin America (No. 3332). IMF. Available at: https://www.imf.org/en/Publications/WP/Issues/2016/12/31/Foreign-Direct-Investment-and-Structural-Reforms-Evidence-from-Eastern-Europe-and-Latin-21639.
• Kondratovs, K. (2014). Modelling financial stability index for Latvian financial system. Regional Formation and Development Studies, 8(3), 118-129.
• Kouamé, Wilfried A., & Tapsoba, Sampawende J-A. (2019). Structural reforms and firms' productivity: Evidence from developing countries. World Development, 113, 157–171. doi:10.1016/j.worlddev.2018.09.005.
• Menyah, K., Nazlioglu, & S., Wolde-Rufael, Y. (2014). Financial development, trade openness and economic growth in African countries: New insights from a panel causality approach. Economic Modelling, 37, 386-394. doi:10.1016/j.econmod.2013.11.044.
• Nardo, M., Saisana, M., Saltelli, A., Tarantola, S., Hoffman, A., & Giovannini, E. (2005). Handbook on Constructing Composite Indicators: Methodology and User Guide OECD Statistics Working Papers, No. 2005/03. Paris: OECD Publishing. Available at: https://ec.europa.eu/eurostat/ramon/statmanuals/files/Constructing_Composite_Indicators_2005.pdf.
• Norris, E. D., Ho, G., & Kyobe, A. (2016). Structural Reforms and Productivity Growth in Emerging Market and Developing Economies. IMF. Available at: https://www.imf.org/external/pubs/ft/wp/2016/wp1615.pdf.
• OECD (2008). Handbook on Constructing Composite Indicators: Methodology and User Guide. Paris: OECD Publishing. Available at: https://www.oecd.org/sdd/42495745.pdf.
• Orphanides, A., & Van Norden, S. (2002). The unreliability of output gap estimates in real-time. The Review of Economics and Statistics, 84, 569–583. doi:10.1162/003465302760556422.
• Ostry, J. D., Prati, A., & Spilimbergo, A. (2009). Structural Reforms and Economic Performance in Advanced and Developing Countries (No. 268). IMF. Occasıonal Paper No: 268, 1-53. Available at: https://www.imf.org/en/Publications/Occasional-Papers/Issues/2016/12/31/Structural-Reforms-and-Economic-Performance-in-Advanced-and-Developing-Countries-22594.
• Özatay, F. (2012). Para politikasında yeni arayışlar. İktisat İşletme ve Finans, 27, 315, 51-75. doi:10.3848/iif.2012.315.5175. Papageorgiou, D., & Vourvachaki, E. (2017). Macroeconomic effects of structural reforms and fiscal consolidations: Trade-offs and complementarities. European Journal of Political Economy, 48, 54-73. doi:10.1016/j.ejpoleco.2016.08.010. Pesaran, M. H. (2004). General Diagnostic Tests for Cross Section Dependence in Panels (IZA Discussion Paper No. 1240). Institute for the Study of Labor, IZA (pp. 1-39).
• Pesaran, M. H. (2007). A simple panel unit root test in the presence of cross‐section dependence. Journal of Applied Econometrics, 22(2), 265-312. doi:10.1002/jae.951.
• Pesaran, M. H., Ullah, A., & Yamagata, T. (2008). A bias‐adjusted lm test of error cross‐section independence. The Econometrics Journal, 11(1), 105-127. doi:10.1111/j.1368-423X.2007.00227.x.
• Prati, A., Onorato, M.G., & Papageorgiou, C. (2013). Which reforms work and under what institutional environment? Evidence from a new data set on structural reforms. Review of Economics and Statistics, 95(3), pp.946-968. doi:10.1162/REST_a_00307.
• Rieth, M., & Wittich, J. (2020). The impact of ECB policy on structural reforms. European Economic Review, 122, 103361. doi:10.1016/j.euroecorev.2019.103361.
• Sethi, D., & Acharya, D. (2020). Monetary policy and financial stability: The role of inflation targeting. Australian Economic Review, 53(1), 50-75. doi:10.1111/1467-8462.12348.
• Swaroop, V. (2016). World Bank's Experience with Structural Reforms for Growth and Development. World Bank, MFM Discussion Paper No: 11 (pp. 1-15). Available at: https://openknowledge.worldbank.org/handle/10986/24360.
• Swiston, A. J., & Barrot, L. D. (2011). The Role of Structural Reforms in Raising Economic Growth in Central America. IMF Working Papers (pp. 1-20). Available at: https://www.elibrary.imf.org/doc/IMF001/12258-9781463923273/12258-9781463923273/Other_formats/Source_PDF/12258-9781463937652.pdf.
• Tatoğlu, F. Y. (2013). İleri panel veri analizi-stata uygulamalı, 2. baskı, Beta, İstanbul.
• Ucar, N., & Omay, T. (2009). Testing for unit root in nonlinear heterogeneous panels. Economics Letters, 104, 5–8. doi:10.1016/j.econlet.2009.03.018.
• Ullrich, K. (2019). Structural Reforms – Easier Said than Done. KfW Research Focus on Economics. Available at: https://www.kfw.de/PDF/Download-Center/Konzernthemen/Research/PDF-Dokumente-Fokus-Volkswirtschaft/Fokus-englische-Dateien/Fokus-2019-EN/Focus-No.-260-August-2019-Structural-reforms.pdf.
• Van Riet, A. (2006). Monetary policy and structural reforms in the Euro area. In: European trade union confederation. structural reforms and the european macro-economic policy (pp. 55-62). Available at: https://www.etuc.org/sites/default/files/Structural_reforms_EN-2_1.pdf.
• Vredin, A. (2015). Inflation Targeting and Financial Stability: Providing Policymakers with Relevant Information. Bank for International Settlements-BIS Working Papers No: 503, 1-39. Available at: https://www.bis.org/publ/work503.pdf.
• World Bank (1996). World Development Report 1996: From Plan to Market. World Bank, 1-241. Available at: https://elibrary.worldbank.org/doi/pdf/10.1596/978-0-1952-1107-8.
• World Bank (2020). Doing Business 2020. World Bank, 1-135. Available at: https://openknowledge.worldbank.org/bitstream/handle/10986/32436/9781464814402.pdf.