Structural and institutional foundations of financial market resilience

Abstract

Abstract. This study examines the structural and institutional foundations of financial market resilience in Azerbaijan, a transition economy increasingly exposed to global financial dynamics. Moving beyond conventional assessments of financial stability, the paper adopts a resilience-oriented perspective that emphasizes the capacity of financial markets to absorb shocks, maintain core functions, and adjust over time. The analysis integrates macro-financial indicators with institutional and regulatory dimensions to provide a comprehensive evaluation of the factors shaping resilience. Using a structured econometric framework complemented by institutional indicators, the study assesses the responsiveness of key financial variables to macroeconomic and external disturbances. The findings indicate that while shocks to financial indicators tend to exhibit persistence, the financial system demonstrates an ability to stabilize gradually, reflecting the combined influence of financial structure and regulatory mechanisms. External exposure introduces vulnerability; however, its destabilizing effects are moderated by domestic institutional arrangements, including regulatory oversight and policy coordination. The results highlight that financial market resilience in Azerbaijan is not solely determined by the degree of financial integration or market size, but rather by the quality of institutional frameworks and structural characteristics of the financial system.