Impact of politically generated shocks on monetary performance: a cross-country comparison
-
DOIhttp://dx.doi.org/10.21511/bbs.14(3).2019.09
-
Article InfoVolume 14 2019, Issue #3, pp. 99-112
- Cited by
- 865 Views
-
126 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
During the post-Great Recession period, macroeconomic stability had more often been threatened by socioeconomic shocks due to the rising of public discontent with the high unemployment rate and poverty, the activation of radical parties and movements, and the aggravation of the geopolitical confrontation in the world. Depending on the type and depth of such shocks, they become politically generated shocks and, in particular, affect the monetary sphere. The article investigates three types of politically generated shocks and their impact on the monetary sphere. It has been found out that the shocks generated by political populism are characterized by fiscal domination in the economy, the use of monetary measures in the budget deficit financing. Shocks arising after the use of international sanctions against certain countries have an external origin and primarily cause the increase in national exchange markets volatility. On the whole, macroeconomic and, especially, monetary instability is the result of the great shocks for the economy, the depth and duration of which are determined by the nature of the crisis, particularly, when country participates in the military conflict. The aforementioned types of politically generated shocks are analyzed based on the experience of countries such as Argentina, Turkey, and Ukraine, which at one time introduced the regime of inflation targeting in monetary policy, but were forced to modify it influenced by political and economic instability.
- Keywords
-
JEL Classification (Paper profile tab)E52, E58, F51
-
References19
-
Tables4
-
Figures6
-
- Figure 1. Transmission mechanism links of the politically generated shocks affecting the economy
- Figure 2. Quarterly growth rates of Argentina’s real GDP in 2016–2018
- Figure 3. Annual inflation rate in Argentina during 2016–2018
- Figure 4. USA/ARS nominal exchange rates in 2018
- Figure 5. Factual and target annual inflation rate in Turkey
- Figure 6. Annual consumer and basic inflation rates in comparison with the inflation target in Ukraine
-
- Table 1. National features of the structure of monetary policy in Argentina, Turkey, and Ukraine
- Table 2. Indicators of Argentina’s macroeconomic development in the post-crisis period
- Table 3. Turkey’s macroeconomic development indicators in the post-crisis period
- Table 4. Macroeconomic development indicators of Ukraine in the post-crisis period
-
- Alqahtani, A. S. S., Ouyang, H., & Saleh, S. (2019). The impact of United States monetary policy uncertainty on the Gulf Cooperation Council stock markets. Investment Management and Financial Innovations, 16(1), 128-143.
- Binici, M., Kara, H., & Özlü, P. (2019). Monetary transmission with multiple policy rates: evidence from Turkey. Applied Economics, 51(17), 1869-1893.
- Cavallaro, E., & Maggi, B. (2016). State of confidence, over borrowing and macroeconomic stabilization in out-of-equilibrium dynamics. Economic Modelling, 59, 210-223.
- Civcir, İ., & Varoglu, D. E. (2019). International transmission of monetary and global commodity price shocks to Turkey. Journal of Policy Modeling, 41(4), 647-665.
- Corbet, S., McHugh G., & Meegan A. (2017). The influence of central bank monetary policy announcements on cryptocurrency return volatility. Investment Management and Financial Innovations, 14(4), 60-72.
- Dornbusch, R., & Edwards, S. (1991). The Macroeconomics of Populism. In The Macroeconomics of Populism in Latin America (pp. 7-13). NBER, University of Chicago Press.
- Féliz, M. (2019). Neodevelopmentalism and Dependency in Twenty-first-Century Argentina: Insights from the Work of Ruy Mauro Marini. Latin American Perspectives, 46(1), 105-121.
- Informe de Política Monetaria. (2019). Banco Central, De La República Argentina.
- Kirici, K., & Sloat, A. (2019). The rise and fall of liberal democracy in Turkey: Implications for the West. Brookings Institution.
- Koziuk, V. (2018). Price Stability and Inflation Targeting in Commodity Economies: Macroeconomics versus a Political Economy? Visnyk of the National Bank of Ukraine, 244, 4-25.
- Lukianenko, I. G., & Dadashova, P. A. (2016). Monetary and fiscal policies interaction in Ukraine. Actual Problems of Economics, 179(5), 295-307.
- Manuelli, R., & Vizcaino, J. I. (2017). Monetary policy with declining deficits: Theory and an application to recent Argentine monetary policy. Federal Reserve Bank of St. Louis Review, 99(4), 351-375.
- Masciandaro, D., & Passarelli, F. (2018). Populism, Financial Inequality and Central Bank Independence: a Political Economics Approach (BAFFI CAREFIN Working Paper 1874). Milano: Bocconi University.
- Matthes, J. (2018). Solvenz- und Liquiditätsrisiken in der Türkei. Wirtschaftsdienst, 98(10), 722-729.
- Misztal, L., Danforth, N., & Michek, J. (2017). Deep State of Crisis: Re-Assessing Risks to the Turkish State. Bipartisan policy center.
- Shevchuk, V., & Kopych, R. (2018). Assessing fiscal sustainability in Ukraine: TVP and VAR/VEC approaches. Entrepreneurial Business and Economics Review, 6(3), 73-87.
- Svensson, L. (1998). Inflation Targeting as a Monetary Policy Rule (NBER Working Paper No. 6790).
- Van Gunten, T. S. (2017). Washington dissensus: Ambiguity and conflict at the international monetary fund. Socio-Economic Review, 15(1), 65-84.
- Yevdokimov, Y., Melnyk, L., Lyulyov, O., Panchenko, O., & Kubatko, V. (2018). Economic freedom and democracy: determinant factors in increasing macroeconomic stability. Problems and Perspectives in Management, 16(2), 279-290.