2022-08-15-ADB-Institutional_Quality_and_Macrofinancial_Resilience_in_Asia_47页_1mb

Summary of "Institutional Quality and Macrofinancial Resilience in Asia"

This working paper by John Beirne and Pradeep Panthi analyzes the impact of institutional quality on macrofinancial resilience in 12 Asian economies from 1996 to 2020. The study finds that:

• Institutional Quality and Resilience: Higher institutional quality significantly enhances resilience of real GDP per capita and net foreign direct investment during financial stress. For portfolio equity investment, institutional quality also bolster resilience, suggesting portfolio rebalancing effects during crises.

• Sub-components Importance: The rule of law, political stability, and regulatory quality are critical sub-components driving macrofinancial resilience.

• Threshold Effects: A clear threshold effect exists, with institutions having a much stronger impact in economies with high institutional quality levels.

• Policy Implications: Strengthening institutional quality through structural reforms is crucial for enhancing resilience to financial shocks, particularly for emerging Asian economies.

The analysis employs a fixed-effects panel regression model with various capital flow measures and control variables. It contributes to understanding how institutions can protect Asian economies against macrofinancial disturbances.