Macroeconomic Instability Research Articles

Output and Energy Prices Fluctuations in Response to Market Shocks: System Dynamic Modeling

Regardless of the fact, whether governments of particular country implemented the strong lockdown measures to prevent the spread of COVID-19 or not, the economies of each country all over the word have been suffered considerably due to the shocks caused by the pandemic. We observed slowdown of economic activity, macroeconomic instability and shifts in consumption preferences supplemented by rising unemployment as well as significant fluctuation of demand and production capability. The research problem addressed in this paper focuses on dynamic properties of output and inflation fluctuations that occur in response to economic shocks different magnitudes and types. We use a system dynamic approach and constructs two system dynamic models to examine the dynamics of output, prices, wage and inflation. The paper indicates ranges of relevant parameters’ values that correspond with sensitivity of output to demand and production capability changes related to possibility of reaching new equilibrium point. To explore the variety of prices and wage behavior in response to shocks we evaluate distinguish possible phase diagrams associated with stable node, stable focus, circle, unstable focus and unstable node. The results is a contribution to discussion of the policy issues related to mitigation of recession caused by unpredictable and strong shocks.

A re-examination of the exchange rate – Interest rate differential relationship in Ghana

This study revisits the relationship between the exchange rate and interest rate differential in Ghana with a focus on the period in which the country adopted the inflation targeting regime. Using macro-data spanning 2002 to 2019 for Ghana and the United States, we show the nonexistence of the relationship in both the short-run and long-run. Further, we show a positive but slow responsiveness of the exchange rate to interest rate differential shocks from the short-run to the medium term. The long-run results, however, shows a case of a strong and significant response of exchange rate to interest rate differential shocks. We recommend that the Bank of Ghana (BoG) addresses perennial macroeconomic instability, especially on inflation, which has been shown to fuel investment uncertainty and investment insensitivity to interest rate.

The significance of terms of trade shocks for retail food prices in Turkey

AbstractEmerging market economies often struggle with macroeconomic instabilities as they experience more persistent terms of trade shocks, volatile exchange rates, and commodity prices compared to the rest of the world. This paper evaluates the impact of terms of trade shocks on retail food prices for an emerging country. To do so, we employ the underlying small open economy macro‐model framework with a panel vector autoregression analysis. Our results show that a positive terms of trade shock decreases retail food prices and their price volatility. Positive terms of trade shock also increases the output gap. We find that these results are more persistent for the fresh fruits and vegetable group, which has the highest price volatility under the retail food prices group. [EconLit Citations: C33, E31, F41].

NEXUS BETWEEN OIL PRICE, EXCHANGE RATE, FISCAL DEFICIT, FINANCIAL DEVELOPMENT AND INFLATION: EVIDENCE FROM INDIA

The economies of developing countries are more affected by high inflation rate which disrupts the consumption, investment and production activities as well as their economic growth and in turn brings macroeconomic instability. This study investigates the impact of oil price, exchange rate, gross fiscal deficit and financial development on the inflation rate in India. The multiple regression model has been employed to analyse the secondary data (1980 to 2020) collected from the web portal of the World Bank and Reserve Bank of India. The result shows that the impact of the exchange rate fluctuation is considerably more realised in this study when compared to other independent factors. So import reduction and maintaining adequate foreign exchange reserves can bring stability in the exchange rate in India. Moreover, policymakers may concentrate on minimising crude oil consumption and promoting the use of renewable energy to protect the domestic economy from changes in oil price fluctuation in the global market. In addition to these suitable monetary as well as fiscal policies are inevitable to reduce the inflationary pressure in Indian economy.

Does macroeconomic stability promote economic growth? Some econometric evidence from SAARC countries

PurposeThe main purpose of this research is to examine the influence of macroeconomic stability on economic growth of SAARC (South Asian Association for Regional Cooperation) countries.Design/methodology/approachUsing panel data of 1991–2020, fixed effect regression analysis, pooled ordinary least squares and generalized method of moments techniques have been conducted to demonstrate whether macroeconomic stability contributes to economic growth. Moreover, cross-sectional dependency test, unit root test, correlation analysis and granger causality tests have been run.FindingsRobust findings indicate that inflation has negative impacts on economic growth which indicates that lower level of macroeconomic instability promotes countries’ economic growth. This study also observed that foreign direct investment, domestic credit delivered to private sector, currency exchange and institutional difference across countries are affirmatively connected while labor force is negatively associated with economic growth.Originality/valueEmpirical findings of this study signify that macroeconomic stability have significant effects on economic growth. Findings of this study have superior contributions for the policy makers to achieve sustainable economic growth.

Macroeconomic Risk, Uncertainty and Financial Market Development: Emerging Markets Perspective

The study examines the effect of macroeconomic instability on financial market development among economies in the sub-region of sub-Saharan Africa (SSA) using a sample of 31 countries from 1996 to 2019. The study focuses on how composite macroeconomic risk index and uncertainty associated with key macroeconomic variables influence the pace of development of financial markets in the sub-region. Empirical estimates and analyses in this regard were performed using the two-step generalized method of moments (GMM) estimation technique. Results from the empirical estimates suggest that macroeconomic risk, inflation volatility and output growth volatility impede the development of financial markets among economies in the sub-region, holding all else constant. Further results show that improved governance and institutional quality may not be enough to assuage the negative impact of heightened macroeconomic risk and uncertainty on financial market development. Political instability, in contrast, is found to worsen the negative influence of macroeconomic risk and uncertainty on financial market development among economies in the SSA sub-region.

The Impact of the Ukraine-Russia War on Food Security and Countries Exposed to Food Supply Shock

Ukraine and Russia together are called the “Breadbasket of Europe” and are the important producers of agricultural commodities. Russia’s invasion on Ukraine has affected the food supply chains and forced manufactures to reshape their supply chain strategies as consumer behavior not only in the specific region but also far away from the conflict zone has changed dramatically. This war has direct and indirect economic exposures globally, disruption of global supply chains, global growth prospects, pressure on exchange rates, spikes in food and fuel prices worldwide, security challenges and macroeconomic instability.

Determinants of FDI in Cape Verde: Empirical Evidence for the Period 1986-2019

Cape Verde has attracted high Foreign Direct Investment (FDI) flows in the last 15 years. Although there is growing literature on the determinants of FDI in developing countries, only a few studies are available addressing African countries. This paper aims to fill this gap and identify the main economic and political determinants of FDI in Cape Verde, a small African country. The analysis is based on data from 1986 to 2019 concerning several macroeconomic and political variables that are potential determinants of Cape Verde's FDI inflows. Firstly, several unit root tests are run, such as the Augmented Dickey-Fuller, Dickey-Fuller-GLS, Phillips-Perron and KPSS tests. As the time series are generally integrated, they are tested for cointegration using Johansen's maximum-eigenvalue and trace tests. Then, a vector error correction model (VECM) is fitted to the data and its goodness-of-fit is satisfactory, enabling the estimation of a long-run regression equation for the FDI, our primary purpose. The fitted model concludes that market growth, macroeconomic instability, infrastructures, political stability, and trade openness are important determinants of FDI inflows. As expected, all but macroeconomic instability have a positive impact on FDI, which means that: economic growth attracts FDI; macroeconomic instability deters FDI; a country with good infrastructure quality can attract larger FDI inflows; a country's political stability brings larger FDI inflows; trade openness also induces FDI, and its impact is quite strong. Furthermore, the estimate of FDI's speed of adjustment or error correction towards the equilibrium is 0.16 percentage points. Maximizing the benefits of FDI requires policymakers to implement appropriate domestic policies. Thus, the above determinants have to be regarded as crucial competitiveness tools for Cape Verde's success as an FDI host country, namely boosting economic growth and ensuring its sustainability, keeping price (macroeconomic) stability, investing in building infrastructures and developing Information and Communication Technologies, ensuring political stability and good government practices, and implementing reforms towards a more export-oriented trade regime.

Factors Influencing Foreign Direct Investment Inflow in Somalia

Purposes: The last four decades, the value of foreign direct investment (FDI) inflow in Somalia has fluctuated between $339,000,000 in 2016 and $43,390,000 in 1970. Thus, this research investigated the factors influencing foreign direct investment (FDI) inflows in Somalia. Over the period from 1980-2017 and data are obtained from the World Bank. Design/ Methodology/ approach: this study used The Vector Auto regression (VAR) model. The econometric methodology to be utilized includes the unit root test for used Augmented Dickey-Fuller (ADF), co-integration test, Johansen integration test and diagnostic test includes serial correlation, normality, heteroskedasticity and AR root test. Furthermore, they are also utilized for VAR Granger causality tests. Findings: The findings of this paper indicated unit root test showed that all variables except external debt are not stationary at the level but become stationary after first differencing at the 10% level of significant. The co-integration test indicates the relationships between variables are integrated. The Granger-causality test shows only one-way Granger-causality relationships from FDI to GDP, import and export variables or so-called unidirectional Granger causality. Moreover, impulse response function indicates results all variables are positive related in the short run and long run except for imports which is negative related with FDI. Although, GDP, imports and inflation are significant to FDI, but export and external debt are insignificant to FDI. Therefore, this research concludes that FDI influences economic growth in Somalia. Research limitations/ implications: Although this research has expended and evolved prior studied various respects, a comprehensive and systematic time-series study on FDI and its determinants in Somalia would involve more capitals than had been made available for this study. There are still a number of specific constrains to be noted on the investigating FDI and its determinants in this paper, some factors such as political and macroeconomic instability, human capital, infrastructure and corruptions are not considered owing to data availability. Moreover, it’s recommended that future studies could improvement widely and update research in FDI.

Inflation uncertainty, macroeconomic instability and the efficiency of financial institutions

PurposeThe study examines the effect of macroeconomic risk, inflation uncertainty and instability associated with key macroeconomic indicators on the efficiency of financial institutions among economies in sub-Saharan Africa (SSA).Design/methodology/approachData for the empirical inquiry were compiled from 35 SSA economies from 1996 to 2019. The empirical estimates were carried out using pooled ordinary least squares (POLS) with Driscoll and Kraay’s (1998) standard errors.FindingsReported empirical estimates show that macroeconomic risk and exchange rate volatility constrain the efficiency of financial institutions. Further results suggest that inflation uncertainty has a significant influence on the efficiency of financial institutions among economies in the subregion. Additionally, reviewed empirical estimates show that institutional quality positively moderates the nexus between inflation uncertainty and financial institution efficiency. At the same time, political instability is found to worsen the adverse effect of macroeconomic risk on the efficiency of financial institutions.Practical implicationsFor policymakers and governments, improved institutional structures are recommended to ensure the operational efficiency of financial institutions, especially during an inflationary period. For decision-makers among financial institutions, the study recommends policies that have the potential to make their institutions less vulnerable to macroeconomic risk and exchange rate fluctuations.Originality/valueThe approach adopted in this study differs significantly from related studies in that the study examines and reviews interactions and relationships not readily found in the reviewed literature.

The Effect of Capital Structure on Corporate Performance: Panel Empirical Evidence of an Emerging Capital Market

ABSTRACT The goal/purpose/objective of the inquiry is to empirically investigate the impact of capital structure (CS) on firm performance (FP), from an emerging capital market perspective, Ghana Stock Exchange (GSE). Using financial data from 36 listed-firms on the GSE, spanning 2010–2020, and employing a robust dynamic panel System of Generalized Method of Moment (GMM), this inquiry examined CS-FP-nexuses. Results revealed that whilst total-debt-to-total-equity-ratio, total-debt-to-total-assets-ratio, long-term-debt-ratio, and financial risk exhibited negative associations with FP; total-equity-to-total-assets-ratio, short-term-debt-ratio, cash conversion cycle, total assets turnover, tangibility, sales-growth, firm size, and firm age revealed positive associations with FP, suggesting that highly leveraged-firms are susceptible to insolvency due to high debt-financing cost with worsened macroeconomic instability effect via increased sensitivity of the economy to shocks. Recommendations were made to policymakers to revamp Ghana’s capital market to encourage equity-investment and also entreat listed-firms to improve upon their profitability and utilize more retained earnings as an internal-financing source to minimize the interest cost on debt-financing. By utilizing data on all the 36 firms listed on the GSE, an uncharted/unexploited path, this current inquiry is one of the few studies that has contributed to the literature on capital structure-performance nexus in Ghana, an emerging West African country south of the Sahara.

ECONOMIC CONSEQUENCES AND PROBLEMS OF POST-WAR RECONSTRUCTION OF TERRITORIES

The article highlights current issues and problems of economic recovery in the post-conflict period. The concept of "post-war recovery" is generalized, the causes and consequences of armed conflicts are structured.
 The economic consequences of armed conflicts in different countries can differ significantly. This is explained by different initial economic conditions, the nature of the conflict, its intensity and duration. It also depends on the international response to the conflict in terms of financial flows and trade policy.
 Armed conflicts lead not only to the cancellation of "normal" development, but also to a radically new path of development for post-conflict countries. As a result of the full-scale invasion, the Ukrainian economy suffered significant losses and decreased by almost a third. Due to the war, domestic demand decreased, there was a disruption in logistics and a loss of labor and production potential. The military conflict led to the emergence of new problems and challenges that the country had not faced before: resettlement of citizens from temporarily occupied territories, reorientation of export-import activities, damage to infrastructure, etc.
 In the article, special attention is paid to the study of macroeconomic instability based on the analysis of key problems that arose on the territory of the country as a result of the war. The impact of the war on economic indicators, namely: the change in GDP, the inflation rate, the unemployment rate, and the consumer price index, is studied.
 It is well-founded that a successful economic recovery cannot simply be a return to the pre-war level of income and development. Economic recovery should essentially be transformative, requiring systemic reforms: economic, institutional, legal and political.
 As historical experience shows, the affected countries remain vulnerable to a recurrence of the conflict. Therefore, post-conflict economic recovery must be flexible and adaptive to reduce the risk of a return to violence. This requires a clear understanding of the factors and consequences of the conflict.

Проблема социального отчуждения и эффективность продовольственного потребления (теоретико-методологические аспекты)

Abstract. In the context of a steadily changing macroeconomic and geopolitical situation and the formation of a new social reality, the issues of the efficiency of food supply and consumption are coming to the fore in the policy of any state. In this regard, the object of this study is to analyze and evaluate the phenomenon of social exclusion in food consumption and its role in the development of the food supply system for the population of our country in the context of macroeconomic instability and turbulence. The objectives of the study are: to identify the most important reasons that cause the persistence of the phenomenon of social exclusion in the field of food consumption in modern Russian society; assessment of the main factors and possible consequences of social exclusion in the socio-economic development of the country; analysis of the relationship between social exclusion, the efficiency of food consumption and the level of poverty in the sphere of food consumption of the population. Methods. To achieve the goal, inductive-deductive, program-target, structural-functional, expert-analytical and historical-retrospective methods were used. Scientific novelty consists in revealing the fundamental causes and main factors of maintaining social exclusion in the sphere of food consumption and determining ways to overcome it in the new social reality. Among the causes of social exclusion in the field of food consumption are endogenous and exogenous factors: the rudimentary preservation of the remnants of the past nomenclature system of catering and its revival in the face of growing bureaucracy; a relatively low share of imported high-quality food products and a high share of low-quality domestic food products; low level of transparency in the organization of food supply; weak legal control and a high level of irresponsibility of officials in the organization of various (especially special) food practices; comparatively high rates of inflation and growth in food prices compared to other groups of goods. The practical significance of the study lies in the development of theoretical and methodological aspects of this problem and the possibilities of its application in the food policy of the state.

Nigeria

Economic recovery continued to broaden in 2022. Higher oil prices are yet to deliver tangible benefits amid contraction of oil production and costly fuel subsidies. Elevated inflation and lingering external sector pressures, if left unaddressed, may exacerbate macroeconomic instability. This could impact growth, food security and ultimately social cohesion given extreme inequality and high poverty. The upcoming elections provide an opportunity for the new administration to advance structural reforms and offer a more prosperous future.

A measurement of dollarization

Purpose- Dollarization refers to the use of foreign currency instead of domestic currency by citizens as a result of macroeconomic instabilities. Generally, due to the instability caused by inflation, the local currency loses its functions as a unit of account, a store of value, and in the last stage, a medium of exchange. Partial dollarization is the fulfillment of any of the three functions of money by a foreign currency. The purpose of this study is to measure the dollarization level of the Turkish economy between 2000 and 2022 (a 23-year period). This study employs the most comprehensive definition of portfolios of Turkish Lira and foreign currency to measure the degree of asset and liability dollarization. This study measures the dollarization degree of the Turkish economy by using the composite dollarization index developed by Reinhart et al., (2003). Methodology- The composite dollarization index based on the definition by Reinhart et al., 2003, has two components; asset dollarization and liability dollarization. This study measures the level of dollarization by using Reinhart's definition of the Turkish economy between 2000 and 2022. We construct the asset dollarization as a ratio of the foreign currency portfolio to the total portfolio. Liability dollarization is defined as the sum of the ratio of foreign currency credit to the total credit, the ratio of the domestic debt in foreign currency to the total domestic debt, and the ratio of total external debt to the GDP. The composite dollarization index is the sum of asset dollarization and liability dollarization. Findings- The dollarization in bank deposits rose to 57%in 2001 and then dropped to 27% in 2010. The dollarization in bank deposits has started to rise again since 2013. The increase in dollarization in bank deposits has accelerated since 2021. It reached 70% by the middle of 2022. Asset dollarization has a similar path to the dollarization in bank deposits. The level of the asset dollarization is generally lower than the level of the deposit dollarization for all years examined. The liability dollarization also follows a similar path. As the degree of asset dollarization increases, the degree of liability dollarization also increases. Finally, the composite dollarization index has been rapidly increasing since 2010. Conclusion- As discussed extensively in the literature, the degree of dollarization is an important indicator of a healthy economy. The literature supports that there is a strong link between the degree of dollarization and macroeconomic indicators. When economic instabilities are on the screen, the use of a stable foreign currency instead of domestic currency increases. Some previous studies measured the dollarization by considering only asset dollarization or only liability dollarization may have deficiencies in the comprehensive definition of dollarization. Therefore, a comprehensive measurement of dollarization should better consider both the assets and liabilities of the balance sheets. The empirical findings of this study indicate that the degree of dollarization has been increasing since 2013 and the rate of increase accelerated especially after 2021 based on the comprehensive dollarization index constructed. Keywords: Dollarization, Turkish economy, composite dollarization index, inflation, macroeconomic instabilities JEL Codes: E31, F31, G01

World energy economics and geopolitics amid COVID-19 and post-COVID-19 policy direction

COVID-19 has placed a focus on the global energy industry. The global energy system in 2020 and beyond was covered in this article. The epidemic had immediate implications on energy demand, particularly for oil, and on energy bills. According to the IEA, understanding the development of the low-carbon energy system and the eventual demise of the current system based on fossil fuels is crucial for predicting the future of global energy geopolitics. Since renewables are the goal of post-COVID-19, geopolitical tensions between nations that produce fossil fuels have been brought to light. Three guidelines are suggested in this paper for the switch to renewable energy sources in order to slow global warming. First, place a focus on immediate policy changes that have a long-term impact on the energy transition. Utilize the upcoming midterm energy transition opportunities. Fresh, uncompromised policy frameworks should be developed. As the pandemic scenario is almost settled, additional research is needed to comprehend the widespread and catastrophic repercussions of post-COVID-19 on energy geopolitics, including variations in energy demand and price, wake of economic recovery, macroeconomic instability, Ukraine crisis and anticipating geopolitical consequences for renewables and fossil fuel economics. More national and regional focus is needed on long-term policy designs and justifications. The effectiveness of altering the sustainable development objectives related to energy or maintaining the current goals with the suggested policy design can also be examined in further research. Key challenges and recommendations are highlighted in order to ensure a successful long-term energy transition that can serve as a reference for energy policymakers in all countries.

The effect of macroeconomic regimes, uncertainty, and COVID-19 outcomes on commodity price volatility: implications for green economic recovery

COVID-19 adversely affected all market mechanisms, shocked economies, halted business operations, and disrupted supply chains. This study examines macroeconomic instability by assessing the commodities market in highly traded regimes using descriptive statistical analysis, the Economic Policy Uncertainty (EPU) Index, and Markov Regime Swapping (MRS) for data covering February 26 to November 30, 2020. The findings indicate that most commodities respond to stock values in both high and low-volatility regimes of supply and demand. Additionally, commodity prices are still in a low volatility regime due to COVID-19-related market uncertainty. The returns for oil, corn, gold, copper, natural gas, silver, and soybeans adapt to low macroeconomic uncertainty and variable rankings for COVID-19. In contrast, changes in COVID-19 deaths had no impact on natural gas or oil under any regime. As agricultural commodities and valuable metals have less negative feedback to exogenous variables than any other commodities, this model is useful for regulators and stockholders. The results suggest that in a global pandemic, portfolio managers and other stakeholders should use priceless metals like gold as a short-term hedge against systemic market risks to achieve macroeconomic stability and facilitate a rapid recovery in the green economy.

Planning and implementation of public investment projects in the face of unstable macroeconomic conditions

Purpose – The aim of the article is to draw attention to possible limitations and potential difficulties related to the implementation of public investment projects in the face of crisis phenomena and in particular the possible impact of macroeconomic factors on public investments. Research method – During the research, the method of critical analysis of the literature as well as analytical and descriptive methods were used in relation to the source data obtained during the empirical research, which allowed determining the impact of changes in macroeconomic factors on the planning and implementation of public investments. Results – Theoretical and empirical studies prove that macroeconomic instability has a significant impact on the course of investment processes in the public sector. The increase in inflation and interest rates of central banks has become a major threat to development processes; it may limit investment activity and reduce the effectiveness of public spending. Originality / value / implications / recommendations – The article discusses the current issues of planning and implementing investments in the face of changes in macroeconomic factors in crisis conditions. The recognized instability of investment processes in the public sector requires a detailed analysis of the current conditions and the impact of potential threats on long‑term economic development. The research shows that there is a need for a thorough and extensive analysis of macroeconomic conditions and their potential influence on the conditions of implementation, including the financing of public investment projects in the future.

ПОВЫШЕНИЕ ЭФФЕКТИВНОСТИ ПРОЦЕССА РАЗРАБОТКИ И ВЫВОДА НА РЫНОК НАУКОЕМКОЙ ПРОДУКЦИИ НА ОСНОВЕ ТЕХНОЛОГИИ «STAGE-GATE»

The purpose of the article is to develop directions for improving the management of the end-toend process of creating and launching high-tech products on the market, which acts as a key efficiency factor in digital transformation. The relevance of the article is due to the fact that the factors and conditions of digital transformation, aggravated by macroeconomic instability, require a restructuring of the management model of industrial knowledge-intensive enterprises. Objectives: 1) identify the features and patterns of the process of creating and launching high-tech products on the market in the digital economy; 2) determine the role of managing the end-to-end process of creating and launching high-tech products on the market as a key efficiency factor in digital transformation; 3) justify the use of the “STAGE-GATE” technology as an adapted approach to the launch of high-tech products, taking into account the influence of changes in the internal and external environment; 4) develop a model of an ideal digital industrial enterprise. Methodology is based on the use of general scientific methods within the framework of a systematic approach: the method of analogy; method of formalization, method of abstraction and logical analysis; decomposition method, structural-logical analysis, synthesis. Results. The conclusion is made about the need for an adapted approach to the launch of high-tech products; here we show the need and feasibility of using the “STAGE-GATE” technology. A description of the “STAGE-GATE” technology is presented, which, unlike the traditional algorithm, allows you to adapt and transform under the influence of changes in the internal and external environment, the emergence of new commercial and technical information about both potential and risks and problems. The prospects of this technology for industrial knowledge-intensive enterprises of medium and large businesses in the fields of robotics, electrical engineering, microelectronics, IT and system integration, and instrument engineering are substantiated. An analysis of the possibilities of combining models “Three components of a digital enterprise: E2M/ E2D/ E2E” was carried out; “Components and systems of a digital enterprise – an ideal model”; “R. Cooper’s Stage-Gate Technology”; “Model stages of implementation of the end-to-end process of creating and launching products on the market – the NPD process” in the process of forming a model of an ideal digital industrial enterprise. Conclusions. The article substantiates that the proposed approach, when applied in practice, will improve the efficiency of the end-to-end process of creating and launching high-tech products on the market due to: 1) the functioning of the elements of a digital enterprise, which are combined into three system areas/ technologies – Design, production and management, namely they determine the implementation of the endto- end process; 2) due to the Stage-Gate technology.

Revisiting of Interest Rate Channel: Nonlinear transmission of Monetary Policy Shocks to the Turkish Economy

Abstract This study examines the effectiveness of non-linear monetary policy interest rate channel shocks for the Turkish economy using the threshold VAR analysis in the period of 2006-2019. The interest channel is examined with the two models for both consumption transfer and investment transfer models. The results show that the interest rate channel is effective in the high regime (high macroeconomic instability) for the consumption transfer model, and it is partially effective in the low regime (low macroeconomic instability). On the other hand, for the model with investment expenditures flow, the interest rate channel is partially effective in both high and low regimes.