Macroeconomic Stability and Its Determinants in Emerging Markets

The impact of external shocks on macroeconomic fluctuations holds significant practical importance for enhancing the economic resilience of developing countries and promoting financial openness. This paper employs a Panel Conditional Homogeneous Vector Autoregression model with exogenous variables (PCHVAR-X) to investigate the internal and external determinants of macroeconomic fluctuations in emerging market economies at different stages of financial openness. The results show that global demand shocks are the most dominant external factor, accounting for approximately 30% of global output variation in both the short and long term. Among domestic factors, financial market pressure is the most significant driver of volatility. In the short term, domestic shocks contribute over 80% to macroeconomic fluctuations, but the influence of external shocks intensifies over time, such as rising from 8.41% at a financial openness level of 50% in the short term to 34.85% in the long term. The response to global monetary policy tightening exhibits an inverted "V"-shaped pattern, with initial mitigation followed by intensified volatility due to liquidity constraints. Additionally, variance decomposition indicates that commodity supply shocks contribute up to 45% to long-term commodity price volatility. The findings underscore that financial openness amplifies the effects of global shocks while also modifying the transmission mechanisms of domestic risks. These insights provide valuable guidance for emerging economies to design differentiated policy strategies balancing openness, resilience, and macroeconomic stability.