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Institutional quality and macrofinancial resilience in Asia

Author

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  • Beirne, John
  • Panthi, Pradeep

Abstract

This paper examines the effect of institutions on macrofinancial resilience in Asia. Focusing on a panel of 12 Asian economies from 1996Q1 to 2020Q4, we find that institutions for economies with high levels of institutional quality support the resilience of real GDP per capita and net FDI inflows during periods of elevated financial stress. In addition, our results suggest resilience due to institutions for these economies regarding net equity and debt inflows in crisis times, also reflecting portfolio rebalancing effects. For economies with lower levels of institutional quality, institutions may help to stabilize portfolio debt during crisis times, although the magnitudes of the effects are small. As well as pointing towards resilience thresholds in institutional quality, our paper provides insights on critical sub-components of overall institutional quality, notably rule of law, political stability, and regulatory quality. The findings help to inform the direction of policy efforts towards strengthening institutional capacity and structural reforms for enhancing economic development and resilience to shocks.

Suggested Citation

  • Beirne, John & Panthi, Pradeep, 2025. "Institutional quality and macrofinancial resilience in Asia," Journal of Asian Economics, Elsevier, vol. 99(C).
    • Handle: RePEc:eee:asieco:v:99:y:2025:i:c:s1049007825000818
    DOI: 10.1016/j.asieco.2025.101957
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    Keywords

    Institutional quality; Economic development; International capital flows; Asia;
    All these keywords.

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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