new  economy  and  trad

new economy and trad

Analyzing Institutional and Financial Spillover Effects on the Dynamics of Trade Flexibility and Economic Resilience: A Flexible Spatial Smooth Transition Regression (FSTR)

Document Type : Research Paper

Author
Assistant Professor , Department of Economics, Faculty of Management, Economics and Accounting, University of Hormozgan, Bandar Abbas, Iran.
10.30465/jnet.2026.54593.2289
Abstract
This study employs a flexible spatial smooth transition regression (FSTR) for dynamic panel data to investigate the asymmetric and nonlinear effects of institutional quality and financial stability on trade flexibility and economic resilience across 19 MENA countries over the period 2000–2024. The main innovations of the paper are threefold. First, it introduces a dynamic hybrid spatial weight matrix that incorporates business cycle synchronization, technological spillovers, and institutional similarity, with time-varying weights. Second, it estimates an FSTR model with two endogenous institutional thresholds, enabling the identification of three distinct institutional regimes. Third, it applies network analysis to economic resilience using degree, betweenness, and eigenvector centrality measures. The results reveal two institutional thresholds: –2.15 and +0.35. In the weak institutional regime (5 countries), corruption exerts a strong detrimental effect on trade flexibility (–0.892), while institutional quality shows no significant impact. In the strong institutional regime (7 countries), the negative effect of corruption diminishes to –0.231, and institutional quality becomes the most important driver of resilience with a coefficient of 0.678. Institutional spillovers account for 38.7% of total spatial effects, outperforming trade-based (24.3%) and geographic (18.9%) spillovers.
Keywords

پورمند بخشایش، طیبه، وجدانی، محمد و صادقی شاهدانی، مهدی. (1399). بررسی فضایی تأثیر صادرات و سرمایه‌گذاری مستقیم خارجی بر اشتغال (منتخب کشورهای منطقه منا. اقتصاد و تجارت نوین، 15(2)،1-27.
شاه‌آبادی، ابوالفضل و فرهمند، محمد. (1397). تأثیر متقاطع فراوانی منابع مالی با شاخص نهادی حکم‌رانی در توزیع درآمد در کشورهای اسلامی منتخب. اقتصاد و تجارت نوین، 13(2)، 81-106.
شمس الدینی، مصطفی. (1405). تحلیل فضایی-زمانی کیفیت توسعۀ شهری در مراکز استان‌های ایران: نقش زیرساخت‌ها، حاکمیت و عوامل اجتماعی-اقتصادی. اقتصاد شهری، 11(1)، 13-28.
کیان پور، سعید و حسین‌نیا چافجیری، سوگند. (1404). تاثیر شفافیت سیاست‌های پولی بانک‌های مرکزی بر بی‌ثباتی دوره‌ای نرخ ارز در منطقه منا. بررسی‌های بازرگانی، 23(131)، 65-82.
نظری، رقیه، هژبر کیانی، کامبیز، امام وردی، قدرت الله و پیکارجو، کامبیز. (1398). اثرات داخلی و خارجی محرک‌های مالی تحقیق و توسعه(R&D): رهیافت مدل‌های داده های تابلویی پویای فضایی. اقتصاد و تجارت نوین، 14(1)، 129-155.
Abdulahi, M. E., Shu, Y., & Khan, M. A. (2019). Resource rents, economic growth, and the role of institutional quality: A panel threshold analysis. Resources Policy, 61, 293-303.
Acemoglu, D., Egorov, G., & Sonin, K. (2021). Institutional change and institutional persistence. In The handbook of historical economics (pp. 365-389). Academic Press.
Addin, E. H. M. S. (2025). Government Effectiveness: A Global Comparative Analysis Using World Bank Governance Indicators. Pub. Governance, Admin. & Fin. L. Rev., 10, 69.
Abaidoo, R., & Agyapong, E. K. (2022). Financial development and institutional quality among emerging economies. Journal of Economics and Development, 24(3), 198-216.
Afonso, A., Alves, J., Menescal, L., & Monteiro, S. (2024). Determinants of trade partner concentration: an analysis for European countries (No. 11481). CESifo Working Paper.
Alnour, M., Kara, S., Oğurlu, Y., Hossain, M. E., Kanwal, S., & Fatima, S. (2026). The Spatial Spillover Effect of Institutional Quality on the Path to Sustainable Socioeconomic Development in Africa. Sustainable Development.
Baysoy, M. A., & Altug, S. (2021). Growth spillovers for the MENA region: geography, institutions, or trade?. The Developing Economies, 59(3), 275-305.
Bhaumik, S., Driffield, N., Lavoratori, K., Song, M., & Vahter, P. (2025). Multinational strategy, institutions and spillovers: the role of institutions in knowledge spillovers in emerging markets. The Journal of Technology Transfer, 50(5), 2476-2508.
Botev, J., Égert, B., & Jawadi, F. (2019). The nonlinear relationship between economic growth and financial development: Evidence from developing, emerging and advanced economies. International Economics, 160, 3-13.
Brower, J., & Dacin, P. A. (2020). An institutional theory approach to the evolution of the corporate social performance–corporate financial performance relationship. Journal of management studies, 57(4), 805-836.
Cadot, O., Carrère, C., & Strauss-Kahn, V. (2011). Trade diversification: Drivers and impacts. Trade and employment: From myths to facts, 253-305.
Chen, L., & Chulu, B. (2023). Complementary institutions of industrial policy: a quasi-market role of government inspired by the evolutionary China Model. Third World Quarterly, 44(9), 1981-1996.
Cheng, T., Wang, J., Haworth, J., Heydecker, B., & Chow, A. (2014). A dynamic spatial weight matrix and localized space–time autoregressive integrated moving average for network modeling. Geographical Analysis, 46(1), 75-97.
Dogan, E., & Wong, K. N. (2020). Sources and channels of international knowledge spillovers in ASEAN‐5: the role of institutional quality. Journal of International Development, 32(4), 470-486.
Erkan, B., & Bozduman, E. T. (2021). Analysis of export concentrations of China and Japan on product basis. ASSAM Uluslararası Hakemli Dergi, 8(19), 140-146.
Engerman, S. L., & Sokoloff, K. L. (2025). Institutional and non-institutional explanations of economic differences. In Handbook of new institutional economics (pp. 757-784). Cham: Springer Nature Switzerland.
Filip, M. D., & Setzer, R. (2025). The impact of regional institutional quality on economic growth and resilience in the EU (No. 3045). ECB Working Paper.
Gereziher, H. Y., & Nuru, N. Y. (2021). Determinants of foreign exchange reserve accumulation: empirical evidence from foreign exchange constrained economy. Journal of Economic and Administrative Sciences, 37(4), 596-610.
Grewal, P. (2025). Marginal Rate of Institutional Compensation (MRIC): A Framework for Institutional Recovery. Available at SSRN 6112006.
Gräbner, C., Heimberger, P., Kapeller, J., & Schütz, B. (2020). Structural change in times of increasing openness: assessing path dependency in European economic integration. Journal of Evolutionary Economics, 30(5), 1467-1495.
Habibi, H. M., Zamanian, G., & Herati, J. (2021). The Short-term and Long-run Effects of Oil revenue fluctuations on Iran's trade balance with using the vector error correction model (VECM) approach. Turkish Online Journal of Qualitative Inquiry, 12(8).
Hu, X., & Hassink, R. (2020). Adaptation, adaptability and regional economic resilience: A conceptual framework. In Handbook on regional economic resilience (pp. 54-68). Edward Elgar Publishing.
Huy, T. P., Hai, Y. N. T., Ngoc, D. D. T., & Thuy, N. B. N. (2025). Corruption, credit risk and economic growth: Global empirical evidence. Southeast Asian Journal of Economics, 13(2), 1-36.
Khan, M., Andreoni, A., & Roy, P. (2019). Anti-corruption in adverse contexts: strategies for improving implementation. ACE Working paper series, 013, 1-48.
Kian poor, S., & Hosseinnia Chafjiri, S. (2025). The impact of central bank monetary policy transparency on cyclical exchange rate volatility in the MENA region. Commercial Surveys, 23(131), 65-82. (In Persian)
Kuźnar, A. (2024). Shaping the economic resilience in East Asia through international trade. In Regional Cooperation and Resilience in East Asia (pp. 52-73). Routledge.
Lazorec, M., Pintilescu, C., & Viorica, E. D. (2023). Determinant Factors of Economic Resilience Output Indicators. a Principal Component Regression Approach. Journal of Public Administration, Finance & Law, 28, 200-219.
Le Gallo, J., & Fingleton, B. (2021). Endogeneity in spatial models. In Handbook of regional science (pp. 2237-2265). Berlin, Heidelberg: Springer Berlin Heidelberg.
Li, K., Fang, L., & Lu, T. (2019). Bayesian panel smooth transition model with spatial correlation. Plos One, 14(3), e0211467.
Murakami, D., Lu, B., Harris, P., Brunsdon, C., Charlton, M., Nakaya, T., & Griffith, D. A. (2019). The importance of scale in spatially varying coefficient modeling. Annals of the American Association of Geographers, 109(1), 50-70.
Nazari, R., Hozhabr Kiani, K., Emamverdi, G., & Peikarjoo, K. (2019). Internal and external impacts of research and development (R&D) financial stimuli: spatial dynamic panel model’s approach. new economy and trad, 14(1), 129-155. (In Persian)
Niedzielski, T., & Halicki, M. (2023). Improving linear interpolation of missing hydrological data by applying integrated autoregressive models. Water Resources Management, 37(14), 5707-5724. Nikolaou, P., & Dimitriou, L. (2024). Spillover effects in transit networks: A parameterized weight matrix spatial lagged approach. Journal of Urban Mobility, 6, 100081.
Panagiotou, G. (2025). The Interplay of Financial Development, Globalization and Institutional Quality: A Sustainable Approach to long-run Economic Growth. Master’s Thesis in Economics, University of Gothenburg, Sweden.
Palenzuela, D. R., Veaceslav, G., Saiz, L., Stoevsky, G., Tóth, M., & Warmedinger, T. (2024). The euro area business cycle and its drivers. ECB Occasional Paper, (2024/354).
Pascariu, G. C., Iacobuță-Mihăiță, A., Pintilescu, C., & Țigănașu, R. (2021). Institutional dynamics and economic resilience in central and eastern EU countries. Relevance for policies. Transylvanian Review of Administrative Sciences, 17(SI), 77-103.
Pourmand bakhshayesh, T., Vejdani, M., & Sadeghi, M. (2020). Spatial survey on the impact of export and foreign direct investment on employment. new economy and trad, 15(2), 1-27. (In Persian)
Pradhan, R. P., Nair, M. S., Arvin, M. B., & Hall, J. H. (2023). Institutional quality, financial development and sustainable economic growth among lower income countries. Natural Resources Forum, 47(3), 435-483.
Śledziewska, K., & Akhvlediani, T. (2017). What determines export performances in high‑tech industries. Central European Economic Journal, 1(48), 37-50.
Shahabadi, A., & Farahmand, M. (2018). The interaction effects of financial sources abundance and good governance index on income distribution in selected Islamic countries. new economy and trad, 13(2), 81-106. (In Persian)
Shamsoddini, M. (2026). A Spatio-Temporal analysis of urban development quality in Iran’s provincial capitals: the role of infrastructure, governance, and socioeconomic factors. Urban Economics, 11(1), 13-28. (In Persian)
Su, Y., Li, Z., & Yang, C. (2021). Spatial interaction spillover effects between digital financial technology and urban ecological efficiency in China: an empirical study based on spatial simultaneous equations. International Journal of Environmental Research and Public Health, 18(16), 8535.
Sutton, J., & Arku, G. (2022). Regional economic resilience: towards a system approach. Regional Studies, Regional Science, 9(1), 497-512.
Ullah, A. A., Rahman, M. M., & Chattoraj, D. (2023). The Middle East and North Africa (MENA): fragility, fragmentation, and crisis. The International Journal of Interdisciplinary Global Studies, 18(2), 31.
Young, S. L., Welter, C., & Conger, M. (2018). Stability vs. flexibility: The effect of regulatory institutions on opportunity type. Journal of International Business Studies, 49(4), 407-441.
Yu, Z., & Di Guo, X. (2023). Integration of ecological innovation, institutional governance, and human capital development for a sustainable environment in Asian Countries. Economic research-Ekonomska istraživanja, 36(3).
Yusuf, A., & Mohd, S. (2021). Asymmetric impact of fiscal policy variables on economic growth in Nigeria. Journal of Sustainable Finance & Investment, 1-22.

  • Receive Date 12 May 2026
  • Revise Date 09 June 2026
  • Accept Date 13 June 2026