Where macroeconomic instability meets economic growth?
Filip Fidanoski, Darko Lazarov, Kiril Simeonovski, Bruno S. Sergi
University of New South Wales, Australia, firstname.lastname@example.org or email@example.com
Goce Delčev University – Štip, Republic of Macedonia, firstname.lastname@example.org
Ministry of Finance, Republic of Macedonia, email@example.com
University of Messina and Harvard University, Italy and USA, firstname.lastname@example.org or email@example.com
Please cite the paper as:
Filip Fidanoski, Darko Lazarov, Kiril Simeonovski, Bruno S. Sergi, (2018), Where macroeconomic instability meets economic growth?, World Economics Association (WEA) Conferences, No. 1 2018, Monetary Policy after the Global Crisis, 19th February to 20th April, 2018
Long-term macroeconomic stability is the most important objective of benevolent decision-makers. Moreover, the link between economic growth and macroeconomic stability becomes very intriguing for the scholars during and after the moments of the Great Recession. Our research of the volatility-growth nexus in the case of Macedonia has resulted in different and consistent remarks. First, we can agree with the authors that the concept of macroeconomic stability is too comprehensive and complex and therefore it is challenging to provide a suitable proxy. The break-down of the concept to financial, economic and price stability is one possible way to address and capture important features of macroeconomic stability. Further, we have documented that the Macedonian economy remained relatively immune to the occurrence of crises during the period of distress in the wake of and during the Great Recession from 2007 to 2009, although it signalled warnings about the risks for potential banking and financial crises. Also, the period of restoring and maintaining of financial stability after Q2 2010 has been marked by overly conservative behaviour by Macedonian banks, lack of investor confidence and absence of robust growth. This confirmed that the financial stability reached a state at which any additional increase would further sterilise the economy. Finally, our results show that the lagged values of growth variable as well as the growth volatility and the financial stability indicator all have negative relationship with the growth rate. Regarding the price volatility, our findings suggests that the immediate effect is negative, yet positive after one quarter considering that the producers will likely have enough time to include price volatility in the calculations and thereby mitigate the adverse effects.