Macroeconomic Stability and Economic Growth: An Empirical Estimation for North Macedonia
Macroeconomic Stability and Economic Growth: An Empirical Estimation for North Macedonia

Summary/Abstract: The main aim of the paper is to investigate the effect of macroeconomic stability on economic growth in North Macedonia by applying ARDL econometric model and by using quarterly data for the period from the first quarter of 2007 to the fourth quarter of 2022. We divide the concept of macroeconomic stability into four sub-concepts – output stability, price stability, fiscal stability and financial stability – and find suitable proxies for each of them. In addition, we add a few growth drivers as control variables. The estimated results indicate that higher GDP volatility has a negative effect on economic growth at one level, but weaker and positive effects at one lag; inflation volatility and budget balance volatility have no effect on GDP growth; and capital adequacy ratio negatively impacts GDP growth. Furthermore, we find that the levels of financial intermediation and indebtedness negatively impact the growth of the Macedonian economy.

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