The Effects of Monetary and Fiscal Policies on Economic Growth in Bangladesh

Noman, Shoayeb; Khudri, Md. Mohsan

doi:10.16962/eapjfrm/issn.2349-2317/2015/v6i3-02

Cited by 10 publications

(12 citation statements)

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“…Hossain and Ibon (2020) attempted to analyze the effectiveness of monetary policy in Bangladesh by identifying various transmission channels. Noman and Khudri (2015) analyzed the impact of monetary policy and fiscal policy on the economic growth of Bangladesh over the period from 1979-80 to 2012-13 by employing an OLS approach and correlation matrix technique. They concluded that monetary policy variables are positively correlated with economic growth.…”

Section: Monetary Policy and Economic Growth Nexusmentioning

confidence: 99%

Does the monetary policy have any short-run and long-run effect on economic growth? A developing and a developed country perspective

Islam

Hossain

Chakrobortty

et al. 2021

AJEB

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PurposeThe study aims to empirically examine the relationship between monetary policy and economic growth, as well as to explore the long-run and the short-run effect of monetary policy on the economic growth of a developing country (Bangladesh) and a developed country (the United Kingdom).Design/methodology/approachDepending on data availability, the study employed secondary data covering the period of 1980–2019. The augmented Dickey–Fuller test and the Phillips–Perron test were used for the stationarity test. Further, the F-bounds test was run to justify the long-run relationship between monetary policy and economic growth. Thereafter, long-run coefficients were revealed from the auto-regressive distributed lag (ARDL) model and short-run coefficients from the error correction model. Furthermore, the vector error correction model (VECM) Granger causality approach was employed to demonstrate the causality of studied variables. Lastly, different diagnostics tests ensured the robustness of the models.FindingsF-bounds test outcomes suggest that monetary policy has a long-run relationship with economic growth in both countries. Long-run coefficients revealed that money supply has a positive long-run impact on economic growth in both countries. Unlike the UK, the exchange rate exhibits an adverse effect on the economic growth of Bangladesh. The bank rate seems to promote economic growth for the UK. Findings also depict that increase in lending interest rates hurts the economic growth for both countries. Besides, the short-run coefficients portray random effects at different lags in both cases. Lastly, causality among studied variables is revealed using the VECM Granger causality approach.Originality/valueThe novelty of this study lies in consideration of both developing and developed countries in the same study.

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Section: Monetary Policy and Economic Growth Nexusmentioning

confidence: 99%

Does the monetary policy have any short-run and long-run effect on economic growth? A developing and a developed country perspective

Islam

Hossain

Chakrobortty

et al. 2021

AJEB

View full text Add to dashboard Cite

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“…Further evidence showed that fiscal policy has larger and greater impact towards accelerating rapid economic growth than the monetary policy in Sub-Saharan Africa. Noman and Khudri (2015) studied the impact of fiscal and monetary policies on economic growth in Bangladesh. The data were collected on annual scale from the period of 1979-80 to 2012-13.…”

Section: Empirical Reviewmentioning

confidence: 99%

Monetary – Fiscal Policy Mix: A Tool for Economic Stabilization in Nigeria

Agbonkhese

Oligbi

2020

International Journal of Social Sciences Perspectives

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The study examined empirically the relationship between monetary-fiscal policy mix and Nigeria's economic stability. The Johansen cointegration technique complemented with VECM were employed to achieve the objective of the study. The result of the descriptive statistics revealed that the variables were normally distributed and the degree of variability of them was good as evident from the Jarque-Bera statistics and standard deviation. The Johansen and Juselius co-integration results revealed that both the trace statistic and maximum Eigenvalue statistic confirmed the existence of co-integrating equations among the variables of interest. It was evident that the trace test indicated six cointegrating equations while maximum Eigenvalue test revealed four cointegrating equations in the model, as the null hypothesis of no cointegration was rejected. These results suggested that there was a unique long run equilibrium relationship among the variables. The VECM result indicated that there was a long run relationship between the variables concerned. The result further showed that monetary-fiscal indicators have not made much significant contributions to the growth of the Nigerian economy as well as economic stabilization in Nigeria. The study recommended the entrenchment of fiscal discipline as a result of destabilizing effect of government's fiscal activities due to its fiscal irresponsibility in Nigeria. Also recommended was that monetary policies should be structured to lower lending interest rate and raise interest rate on saving deposits so as to increase the availability of loanable funds which will in turn boost investment and stimulate economic growth.Funding: This study received no specific financial support Competing Interests: The authors declare that they have no competing interests. Acknowledgement: The authors are deeply grateful to the anonymous referees of this paper who made comments that were very useful in revising and improving the quality of the paper. We say thank you all.

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“…Noman and Khudri (2015) conducted a study to investigate the impact of monetary and fiscal policy on economic growth in Bangladesh using line diagram and multiple linear regression models over the period of 1980 to 2012. Furthermore, Noman and Khudri (2015) Equation 4.3 represents the fundamental model of this study that is to be estimated in logarithms (L). The logarithm operator is included as it has the advantage of stabilizing the variance of the lagged variable.…”

Section: Model Specificationmentioning

confidence: 99%

“…Yearly data for the variables indicated in the model represented by equation 4.2 which was originally developed by Noman and Khudri (2015)…”

Section: Data Sourcesmentioning

confidence: 99%

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The Impact of Fiscal and Monetary Policy on Economic Growth in Southern African Custom Union (SACU) Member Economies between 1980 and 2017: A Panel ARDL Approach

Monamodi

2019

SSRN Journal

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This study seeks to investigate the impact of fiscal and monetary policy on economic growth in Southern African Custom Union (SACU) member economies between 1980 and 2017. Government expenditure and revenue were used as the proxy variables for the fiscal policy whereas real interest rate, inflation, official exchange rate and M2 money supply were used as the proxy variables for monetary policy. Using Lin, Levin and Chu (LLC), and Im, Peresan and Shin (IPS) unit root tests, it was found that all variables were stationary at level except for M2 money supply which was found to be stationary after first difference. Due to this, Panel Auto Regression Distributed Lags (PARDL) estimation technique was utilized in this study. Pooled Mean Group (PMG) PARDL model estimator was used in this study. The results indicate that fiscal and monetary policy influence economic growth significantly in the long run. However, fiscal policy is only significant if government expenditure is used as the functional policy instrument rather than government revenue. In the short run, the effects of these two macroeconomic policies on economic growth are mixed. Granger causality results indicate that the direction government expenditure, real interest rate, inflation and official exchange rate Granger cause economic growth. These causality links are unidirectional in nature. Lastly, the results also indicate that private investment is crowded out in the long run because of significant high levels of government expenditure in the long run across SACU member economies. In the short run, private investment is crowded out because of significant high level of government expenditure only in Swaziland. As some of the recommendations of this study, SACU member governments should redirect their public expenditures into investing more in human capital. Investing in human capital, among other factors can include empowering the active unemployed population with relevant skills that meet labor markets for easy employment. In that case, the tax revenues would increase which could play an important role in reducing government budget deficits. Furthermore, SACU member economies' central banks can make monetary policy more effective by using monetary accommodation. Hence, when the governments apply expansionary fiscal policy, the central banks can increase money supply to avoid interest rates from increasing (monetizing budget deficit).

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The Effects of Monetary and Fiscal Policies on Economic Growth in Bangladesh

Cited by 10 publications

References 1 publication

Does the monetary policy have any short-run and long-run effect on economic growth? A developing and a developed country perspective

Does the monetary policy have any short-run and long-run effect on economic growth? A developing and a developed country perspective

Monetary – Fiscal Policy Mix: A Tool for Economic Stabilization in Nigeria

The Impact of Fiscal and Monetary Policy on Economic Growth in Southern African Custom Union (SACU) Member Economies between 1980 and 2017: A Panel ARDL Approach

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