Macroeconomic stability: an international comparison with a panel var model

Resumen

Monetary and fiscal stability is fundamental to evaluate a country’s macroeconomic performance. A measure of macroeconomic stability is crucial for a central bank’s monetary policy decisions, and for the central government’s fiscal policy actions. Over time, economic literature has designed different indicators, within an economy, to measure monetary and fiscal stability, but few attempts have come to develop a unique indicator for macroeconomic stability. This document aims to close this gap and
introduce the so-called Monetary and Fiscal Stability Indicator (MFSI), which is built based on annual data for a set of emerging and developing countries, from 2005 to 2021. Using a panel VAR model, we found empirical evidence that this indicator has a significant and robust negative relationship with economic growth.