The impact of monetary strategies on economic growth: an empirical analysis for Pakistan

Abstract

The present study aims to check the long run relationship between monetary variables and gross domestic product. The study has used the yearly data for the periods of 30 years from 1983 to 2013. It is concluded that GDP is positively associated with M2, government expenditures, and inflation. While it is negatively related with interest rate, growth becomes possible with low interest rate. Investment opportunities are increased in economy. With currency appreciation, it has positive impact on growth. Domestic products are cheaper that compete in international markets and BOP becomes favorable. Due to increase in government borrowing from SBP for development purposes money supply increases. Money supply firstly effects the growth, and then it shows the impact on inflation. Due to the increase in the demand of goods output increases and it generates more employment opportunities. Lower interest rate encourages the investor to invest with the result employment increases. These monetary policies increase output growth through money supply which has short run effect. Most of the developing countries lag behind in attaining the objectives and goals of monetary policy. The main hurdles are to increase internal government borrowing and inflation pressure which destabilize the entire economy. Contribution/ OriginalityThe present study aims to check the long run relationship between monetary variables and gross domestic product. The study has used the yearly data for the periods of 30 years from 1983 to 2013.

Empirical Investigation of Fiscal, Monetary and Trade Policies Impact on Economic Growth of Pakistan

“…Stationarity of Data-ADF and PP test were employed to check the stationarity of the data. The results are in line with Mahmood and Sial (2012), Shaheen et al, (2013), Umer (2014), Adeeb et al, (2014), Ayub and Maqbool (2015), Ahmad et al, (2016), Hussain et al, (2017), Mahmood et al, (2017), andHimayatullah (2017).…”

“…The demand for money plays an important role in the formulation of monetary policy. Mahmood et al, (2017) concluded that GDP is positively linked to M2. Trade openness plays a momentous role in increasing economic growth of a country.…”

Factors Influencing Domestic Credit to Private Sector in Malaysia: Application of Vector Auto-Regressive Method

“…The study finds that the lagged private sector credit growth, nominal exchange rate, and inflation have a statistically significant effect on private sector credit growth while financial innovation, interest rates, and GDP growth appear not to be important determinants of private sector credit growth. Mahmood et al (2017) have presented a time series data analysis to find the long-run relationship between money supply (M2) and Gross Domestic Product for a data set from 1983 to 2013. They have confirmed that M2, government spending and inflation rate, all have a significant positive impact on GDP, whereas interest rate has a negative impact on economic growth which concludes that low-interest rate triggers economic growth.…”

Economic Growth, Inflation and Monetary Policy in Pakistan: Preliminary Empirical Estimates

“…The result of this study showed that the money supply was a dominant reason for inflation. Mahmood, Waheed and Khalid (2017) estimated the effect of monetary policy on the economic growth of Pakistan. This study used time series data which covered the period from 1983 to 2013.…”