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Monetary Commitment and Structural Reforms: A Dynamic Panel Analysis for Transition Economies

  • Ansgar Belke
  • Lukas Vogel

This paper examines the contemporaneous relationship between the exchange rate regime and structural economic reforms for a sample of CEEC/CIS transition countries. We investigate empirically whether structural reforms are complements or substitutes for monetary commitment in the attempt to improve macroeconomic performance. Both EBRD and EFW data suggest a negative relationship between flexible exchange rate arrangements and external liberalization. Another finding from the EFW sample is that economic liberalisation has tended to be stronger under better macroeconomic fundamentals, suggesting that the impact of good macroeconomic conditions as facilitating structural reforms outweighs countervailing effects in the sense of lower reform pressure.

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Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 1221.

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Length: 23 p.
Date of creation: 2012
Date of revision:
Handle: RePEc:diw:diwwpp:dp1221
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  1. Ansgar Belke & Bernhard Herz & Lukas Vogel, 2007. "Reforms, Exchange Rates and Monetary Commitment: A Panel Analysis for OECD Countries," Open Economies Review, Springer, vol. 18(3), pages 369-388, July.
  2. Ansgar Belke & Bernhard Herz & Lukas Vogel, 2006. "Exchange Rate Regimes and Reforms: A Panel Analysis for the World versus OECD Countries," International Finance, Wiley Blackwell, vol. 9(3), pages 317-342, December.
  3. Ansgar Belke & Ingo Bordon & Inna Melnykovska & Rainer Schweickert, 2009. "Prospective NATO or EU Membership and Institutional Change in Transition Countries," Discussion Papers of DIW Berlin 915, DIW Berlin, German Institute for Economic Research.
  4. Robert J. Barro & David B. Gordon, 1981. "A Positive Theory of Monetary Policy in a Natural-Rate Model," NBER Working Papers 0807, National Bureau of Economic Research, Inc.
  5. Calmfors, Lars, 1998. "Macroeconomic Policy, Wage Setting, and Employment--What Difference Does the EMU Make?," Oxford Review of Economic Policy, Oxford University Press, vol. 14(3), pages 125-51, Autumn.
  6. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
  7. Sibert, Anne & Sutherland, Alan, 1997. "Monetary Regimes and Labour Market Reform," CEPR Discussion Papers 1731, C.E.P.R. Discussion Papers.
  8. Céline Allard, 2009. "Competitiveness in Central-Europe; What Has Happened Since EU Accession?," IMF Working Papers 09/121, International Monetary Fund.
  9. Duval, Romain, 2008. "Is there a role for macroeconomic policy in fostering structural reforms? Panel evidence from OECD countries over the past two decades," European Journal of Political Economy, Elsevier, vol. 24(2), pages 491-502, June.
  10. Robert J. Barro & David B. Gordon, 1983. "Rules, Discretion and Reputation in a Model of Monetary Policy," NBER Working Papers 1079, National Bureau of Economic Research, Inc.
  11. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
  12. Romain Duval & Jørgen Elmeskov & Lukas Vogel, 2007. "Structural Policies and Economic Resilience to Shocks," OECD Economics Department Working Papers 567, OECD Publishing.
  13. Emilia M Jurzyk & Bernhard Fritz-Krockow, 2004. "Will You Buy My Peg? the Credibility of a Fixed Exchange Rate Regime As a Determinant of Bilateral Trade," IMF Working Papers 04/165, International Monetary Fund.
  14. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
  15. John Fender & Neil Rankin, 2006. "Disinflation in an Open-Economy Staggered-Wage DGE Model: Exchange-Rate Pegging, Booms and the Role of Preannouncement," CDMA Working Paper Series 200610, Centre for Dynamic Macroeconomic Analysis.
  16. Witold J. Henisz, 2002. "The institutional environment for infrastructure investment," Industrial and Corporate Change, Oxford University Press, vol. 11(2), pages 355-389.
  17. Calmfors, Lars, 2001. "Unemployment, Labor Market Reform, and Monetary Union," Journal of Labor Economics, University of Chicago Press, vol. 19(2), pages 265-89, April.
  18. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June.
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