Abstract
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 liberalisation. 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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Notes
With respect to the specification test, note that unbiased and efficient GMM system estimations requires the absence of residual autocorrelation in first differences, but not absence of residual autocorrelation in levels. We report p-values for the null hypothesis of no first-order and no second-order residual autocorrelation respectively. Hence, rejection of the AR (1) null hypothesis does not invalidate of our results. The Sargan test statistics indicates problems with the validity of instruments, which is its null hypothesis, in several cases. However, Sargan test statistics from 1-step estimation tend to be biased towards rejecting the null hypothesis in the presence of heteroskedasticity (Arellano and Bond 1991). The Sargan statistics from 2-step estimation do not reject the null in any of the cases of 1-step rejection in the tables. We use the xtdpdsys option in Stata11 for the GMM system estimation.
We are grateful to an anonymous referee for raising this issue.
We again gratefully acknowledge this argument raised by an anonymous referee.
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Acknowledgments
The authors are grateful for valuable comments received from the participants in the 2011 INFER Conference, University of East London, and at the 2009 IZA Topic Week on “The Political Economy of Labour Market Reform in Transition and Emerging Economies” Bonn.
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The views in this article are personal views of the authors and do not reflect positions of the European Commission.
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Belke, A., Vogel, L. Monetary commitment and structural reforms: a dynamic panel analysis for transition economies. Int Econ Econ Policy 12, 375–392 (2015). https://doi.org/10.1007/s10368-014-0306-7
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DOI: https://doi.org/10.1007/s10368-014-0306-7