Efficacy of Fiscal and Monetary Policy in Sierra Leone: An Ardl Bound Testing Approach

The degree of responsiveness of fiscal and monetary policy in Sierra Leone

“…However, it contradicts the findings of other related empirical studies by Andersen and Jordan (1968), Ajisafe and Folorunso (2002), Jawaid et al. (2011), Senbet (2011), Havi and Enu (2014), Şen and Keya (2015), and Tarawallie and Kargbo (2020), which support the monetarist viewpoint of the dominance of monetary policy over fiscal policy in promoting economic growth.…”

“…The findings of this study are consistent with other previous studies by De Leeuw et al (1969), Latif and Chowdhury (1998), Khosravi and Karimi (2010), Ezeji and Michael (2013), Sriyana (2019), etc., which support the Keynesian doctrine of the effectiveness of fiscal policy over monetary policy in promoting sustainable economic growth. However, it contradicts the findings of other related empirical studies by Andersen and Jordan (1968), Ajisafe and Folorunso (2002), Jawaid et al (2011), Senbet (2011, Havi andEnu (2014), S ¸en andKeya (2015), and Tarawallie and Kargbo (2020), which support the monetarist viewpoint of the dominance of monetary policy over fiscal policy in promoting economic growth.…”

“…Some studies conclude that fiscal policy is superior to the monetarist view, while other related works argue the opposite when it comes to promoting sustainable growth in the economy. The studies conducted by Anderson and Jordan (1968), Batten and Hafer (1983), Bynoe (1994), Havi andEnu (2014), S ¸en andKeya (2015) and Tarawalie and Kargbo (2020) on the superiority of monetary policy in economic growth show that the claim of high responsiveness of monetary policy over fiscal policy in promoting growth is obviously supported. However, studies by De Leeuw et al (1969), Latif and Chowdhury (1998), Khosravi and Karim (2010), Ezeji and Micheal (2013) and Sriyana (2019), however, support the Keynesian doctrine of fiscal dominance in managing growth and development.…”

The relative effectiveness of fiscal and monetary policies in promoting Egypt’s output growth: an empirical investigation using an ARDL approach

“…Second, in terms of the variable used as a measure of economic growth, the majority of reviewed studies uses nominal GDP as the dependent variable ( see for instance , Orsmond 1992 ; Bynoe 1994 ; Fatima and Iqbal 2003 ; Ali et al 2008 ; Mahmood and Sial 2011 ; Abu Hasan et al 2016 ; Ajayi and Aluko 2017 ; Richard et al 2018 ). Some researchers, however, such as Rahman ( 2005 ); Hussain ( 2014 ); Şen and Kaya ( 2015 ); Özer and Karagöl ( 2018 ); and Tarawalie and Kargbo ( 2020 ), have used real GDP instead. Hasan ( 2001 ) examines two specifications of the estimated model, where both nominal GDP and real GDP are used, respectively, to proxy economic growth.…”

“…Third, regarding the variables used as measures of monetary and fiscal policy actions, the majority of reviewed studies uses money supply, narrowly or broadly defined, as proxy of monetary actions and government expenditure as proxy of fiscal actions. Yet, in some studies, variables like government revenues and/or fiscal deficit are used in combination with or in replacement of government expenditure to proxy fiscal policy actions (s ee for instance , Ali et al 2008 ; Iyeli et al 2012 ; Şen and Kaya 2015 ; Abu Hasan et al 2016 ; Usman and ul-Haq 2016 ; Richard et al 2018 ; Tarawalie and Kargbo 2020 ). Similarly, some studies add various measures of monetary policy, such as interest rate, exchange rate, inflation, and foreign reserves, in combination with or in replacement of money supply to proxy monetary actions ( see for instance , Rahman 2005 ; Hussain 2014 ; Şen and Kaya 2015 ; Usman and ul-Haq 2016 ; Richard et al 2018 ; Özer and Karagöl, 2018 ; Tarawalie and Kargbo 2020 ).…”