Abstract
This paper investigates the differences in macroeconomic dynamics that occurred during instabilities in the Belarusian financial market from 2004 to 2016. In this regard, I construct the Belarusian financial stress index (BFSI) as a proxy for financial stress, identify episodes of financial turmoil, assess consequences for the real economy, and examine its interaction with real economic activity and monetary policy using ARDL approach. The results show that during studied period Belarusian economy experienced two episodes of financial stress that coincided with a substantial and prolonged decline in the economic activity. Financial stress has large negative long-run effect on real economic activity. The findings also reveal that price stability is not a sufficient condition to support financial stability in the Belarusian economy.
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