scholarly journals The Nexus of Government Spending, Price, Output, and Money in the ECOWAS Sub-Region: Evidence from Panel ARDL and Causality Approach

2021 ◽  
Vol 35 (1) ◽  
pp. 71-90
Author(s):  
Matthew Abiodun Dada ◽  
Sunday Mauton A. Posu ◽  
Osaretin Godspower Okungbowa ◽  
Bamidele P. Abalaba
Keyword(s):  
Economic Growth ◽  
Growth Rate ◽  
Exchange Rate ◽  
Money Supply ◽  
Government Spending ◽  
Population Growth Rate ◽  
Living Standard ◽  
Panel Ardl ◽  
Long Run ◽  
Short Run

Abstract The question of how macroeconomic variables dynamically interact is very crucial in any broad-based economic integration aiming at expanding economic growth and living standard in any human society. This study examined the nexus of government spending, price, output, and money in the ECOWAS sub-region using panel ARDL and causality approach. Data covering the period (1981–2019) were collected mainly from the latest version of the World Development Indicators. The result showed a positive relationship between government spending with GDP, import, exchange rate, unemployment rate, and population growth rate but a negative relationship between government spending with inflation, money supply, export, and interest rate. The result further showed short-run unidirectional causality running from government spending to inflation, money supply to inflation as well as money supply to GDP. Short-run bi-directional causality existed between GDP and inflation but none between government spending and GDP nor between government spending and money supply. The result of long-run Granger causality test showed bi-directional causality between government spending with inflation, government spending, and money supply; GDP and inflation; and GDP and money supply. Unidirectional causality ran from GDP to government spending; and money supply to inflation. The overall implication of this study established that an increase in government spending lowered inflation and raised the living standard of people in the ECOWAS sub-region in the long run. The study therefore concluded that any rise in import, unemployment rate, exchange rate, and population growth rate would raise government spending growth rate in the short run; and an increase in government spending would shrink inflation and boost economic growth and living standard in the long run.

scholarly journals Multivariate Dynamic Co-integration and Causality Analysis between Inflation and its Determinants

2016 ◽  
Vol 8 (5(J)) ◽  
pp. 240-250
Author(s):  
Md. Sharif Hossain ◽  
Md. Thasinul Abedin
Keyword(s):  
Economic Growth ◽  
Money Supply ◽  
Government Spending ◽  
Time Series Data ◽  
Series Data ◽  
Value Addition ◽  
Speed Of Adjustment ◽  
Long Run ◽  
Short Run ◽  
Adf Test

This paper investigates the impacts of money supply, government expenditure, velocity, industry value addition and economic growth on inflation of Bangladesh using time series data from 1978-2014. The ADF test results suggest that the variables are of I(1). It is found that there exist five co-integration equations. The outcome of the Granger Causality test suggests the short-run unidirectional causality running from industrial value addition to money supply, from inflation, money supply, velocity, industrial value addition and economic growth to government spending. Bidirectional causality has been found between economic growth and industrial value addition. Finally, short-run and long-run effects of money supply, government spending, velocity, industry value addition and economic growth on inflation are estimated. It is found that the speed of adjustment for short-run to approach to the long-run equilibrium level is significant at any significance level. It has been found that it will take about 1.25 years for a complete convergence process to approach its equilibrium. Therefore, in case of any shock to the inflation equation, the speed of adjustment is significantly faster. It has also been found that the long-run effects of money supply and velocity have positive significant effects while the economic growth has significant negative effect on inflation in Bangladesh economy. It has been found that the long-run effects of money supply and velocity are more than short-run effects meaning that over the time more money supply and velocity increase the more and more inflation in Bangladesh but economic growth decreases the inflation.

Forming Sources of Long-run Growth: How to Understand Them?

2014 ◽  
pp. 4-20 ◽  
Author(s):  
G. Idrisov ◽  
S. Sinelnikov-Murylev
Keyword(s):  
Economic Growth ◽  
Growth Rate ◽  
Economic Policy ◽  
Business Cycle ◽  
Capital Markets ◽  
Productivity Growth ◽  
Government Spending ◽  
Long Run ◽  
Accelerate Growth ◽  
Budget Institutions

The paper analyzes the inconsequence and problems of Russian economic policy to accelerate economic growth. The authors consider three components of growth rate (potential, Russian business cycle and world business cycle components) and conclude that in order to pursue an effective economic policy to accelerate growth, it has to be addressed to the potential (long-run) growth component. The main ingredients of this policy are government spending restructuring and budget institutions reform, labor and capital markets reforms, productivity growth.

scholarly journals INFLASI DARI SUDUT PANDANG MONETER DAN FISKAL (STUDI KASUS SUMATERA BARAT)

2019 ◽  
Vol 1 (1) ◽  
pp. 131
Author(s):  
Zul Azhar ◽  
Alpon Satrianto ◽  
Nofitasari Nofitasari
Keyword(s):  
Interest Rate ◽  
Money Supply ◽  
Government Spending ◽  
Descriptive Research ◽  
Distributed Lag ◽  
Long Run ◽  
Negative Effect ◽  
Short Run ◽  
The Interest Rate ◽  
Positive Effect

This study aims to analyze the effect of money supply M2, interest rate, government spending and local tax on the inflation in West Sumatera. This type of research is descriptive research and secondary datain the form of time-series from quartely 1 2007 to 2017 quartely 4 using the method of Autoregresive Distributed Lag analysis. The results of this study indicate that money supply in the long run have a significant and positive effect on inflation West Sumatera. In the short run  and long run the interest rate has a significant and positive effect on inflation in West Sumatera. Government spending in the Long run has a significant and negative effect on inflation in West Sumatera. Based on the result of this study can be concluded that there is inflation in West Sumatera is monetery of phenomenon in the long run. 

scholarly journals Impact of Exchange Rate Management on the Nigerian Economic Growth: Empirical Validation

2019 ◽  
Vol 1 (2) ◽  
pp. 28-35
Author(s):  
Friday Osaru Ovenseri Ogbomo ◽  
Precious Imuwahen Ajoonu
Keyword(s):  
Economic Growth ◽  
Exchange Rate ◽  
Inflation Rate ◽  
Government Expenditure ◽  
Least Square ◽  
Ordinary Least Square ◽  
Exchange Rate Management ◽  
Long Run ◽  
Short Run ◽  
The Impact

This paper examined the impact of Exchange Rate Management on economic growth in Nigeria between 1980 and 2015. The study was set to gauge how the management of exchange rate in Nigeria has impacted the economy. The study employed the Ordinary Least Square (OLS) method in its analysis. Co-integration and Error Correction Techniques were used to establish the Short-run and Long-run relationships between economic growth and other relevant economic indicators. The result revealed that exchange rate management proxy by various exchange rates regimes in Nigeria was not germane to economic growth. Rather, government expenditure, inflation rate, money supply and foreign direct investment significantly impact on economic growth in Nigeria. It is against this backdrop that the Nigerian economy must diversify her export base to create room for more inflow of foreign exchange.  

scholarly journals FDI and Economic Growth in EU13 Countries: Cointegration and Causality Tests

2020 ◽  
Vol 12 (3) ◽  
pp. 47-63
Author(s):  
Vlatka Bilas ◽  
Keyword(s):  
Economic Growth ◽  
Growth Rate ◽  
European Union ◽  
Annual Data ◽  
Foreign Direct Investments ◽  
Causality Test ◽  
Panel Ardl ◽  
Long Run ◽  
Causality Tests ◽  
The Relationship

Foreign direct investments are seen as a prerequisite for gaining and maintaining competitiveness. The research objective of this study is to examine the relationship between foreign direct investment (FDI) and economic growth in “new” European Union member countries using various unit root, cointegration, as well as causality tests. The paper employs annual data for FDI and gross domestic product (GDP) from 2002 to 2018 for the 13 most recent members of European Union (EU13): Bulgaria, Croatia, Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Romania, Slovakia and Slovenia. An estimated panel ARDL (PMG) model found evidence that there is a long-run equilibrium between the LogGDP, LogFDI and LogFDIP series, with the rate of adjustment back to equilibrium between 3.27% and 20.67%. In the case of the LogFDI series, long-run coefficients are highly statistically significant in all four models, varying between 0.0828 and 0.3019. These coefficients indicate that a 1% increase in LogFDI increases LogGDP between 0.0828% and 0.3019%. Results of a Dumitrescu-Hurlin panel causality test indicated that a relationship between the GDP growth rate and FDI growth rate is only indirect. Finally, only weak evidence was shown that FDI had a statistically significant impact on GDP in the EU13 countries over the period 2002-2018. This report of findings contributes to the literature concerning FDI and economic growth, namely regarding the current understanding of the relationship between these two factors.

scholarly journals An econometric analysis of the effectiveness of fiscal and monetary policies in India

2021 ◽  
Author(s):  
Anand Nadar
Keyword(s):  
Economic Growth ◽  
Monetary Policy ◽  
Fiscal Policy ◽  
Money Supply ◽  
Series Data ◽  
Monetary Policies ◽  
Indian Economy ◽  
Long Run ◽  
Short Run ◽  
Bound Test

This study investigatesthe effectiveness of fiscal policy and monetary policy in India. We collected thetime series data for India ranging from 1960 to 2019 from World Development Indicator (WDI). Weapplied the bound test co-integration approach to check the long-run relationship between fiscalpolicy, monetary policy, and economic growth in the context of Indian economy. The short-run andlong-run effects of fiscal policy and monetary policy have been estimated using ARDL models. Theresults showed that there is a long-run relationship between fiscal and monetary policies witheconomic growth. The estimated short-run coefficients indicated that a few immediate short runimpacts of fiscal and monetary policies are insignificant. However, the short-run impacts becomesignificant as time passes. The long-run results suggested that the long-run impact of both fiscal andmonetary policies on economic growth are positive and significant. More specifically, the GDP levelincreases if the money supply and government expenditure increase (Expansionary fiscal andmonetary policies). On the other hand, the GDP level decreasesif the money supply and governmentexpenditure decrease (contractionary fiscal and monetary policies). Therefore, this studyrecommends to use expansionary policies to spur the Indian economy.

Money Supply-Economic Growth Nexus: Evidence from a Landlocked Country

2020 ◽  
Vol 2 (1) ◽  
pp. 106-115
Author(s):  
Tilak Singh Mahara
Keyword(s):  
Economic Growth ◽  
Money Supply ◽  
Correction Term ◽  
Policy Instruments ◽  
Special Role ◽  
Real Gdp ◽  
Long Run ◽  
Ardl Approach ◽  
Short Run ◽  
The Impact

Background: There is special role of money in the economy due to its astonishing importance as change in the amount of it can have a significant effect on the major macroeconomic variables. Money supply is generally considered as policy-determined phenomenon. Like in all the nations, macroeconomic stability of Nepal also depends on the variation in the quantity of money. Objective: The principle objective of the study is to examine the impact of money supply on the economic growth of Nepal. Methodology: This study applies the ARDL approach to cointegration. Bounds test (F-version) has been carried out to determine the existence of long-run relationship between variables. Results: The empirical results pointed out that there is positive and significant long-term relationship between money supply and real economic growth in Nepal. Causality result reveals that there is unidirectional causality from money supply (M2) to Real GDP. The error correction term is found negative and statistically significant suggesting a correction of short-run disequilibrium within two and a half years. Conclusions: The study concludes that increase in the money supply helps to increase the real economic growth in Nepal. So, money supply and real GDP are associated in the long-run.  Implications: The implication of the study is that, real economic growth in Nepal can be achieved if Nepal Rastra Bank emphasized on monetary policy instruments which help to increase the flow of money supply both in the short and long run.

The effectiveness of government expenditure on economic growth in Botswana

2019 ◽  
Vol 10 (3) ◽  
pp. 368-384 ◽  
Author(s):  
Kafayat Amusa ◽  
Mutiu Abimbola Oyinlola
Keyword(s):  
Economic Growth ◽  
Government Spending ◽  
Negative Impact ◽  
Positive Impact ◽  
Government Expenditure ◽  
Public Spending ◽  
Empirical Literature ◽  
Content Type ◽  
Long Run ◽  
Short Run

Purpose The purpose of this paper is to examine the relationship between government expenditure and economic growth in Botswana over the period 1985‒2016. The study employed the auto-regressive distributed lag (ARDL) bounds testing approach in investigating the nexus. The study makes the argument that the effectiveness of public spending should be assessed not only against the amount of the expenditure but also by the type of the expenditure. The empirical findings showed that aggregate expenditure has a negative short-run and positive long-run effect on economic growth. When expenditure is disaggregated, both forms of expenditures have a positive short-run effect on economic growth, whereas only a long-run positive impact of recurrent expenditure is observed. The study suggests the need to prioritize scarce resources in productive recurrent and development spending that enables increased productivity. Design/methodology/approach This study examined the effectiveness of government spending in Botswana, within an ARDL framework from 1985 to 2016. To achieve this, the analysis is carried out on both an aggregate and disaggregated level. Government spending is divided into recurrent and development expenditures. Findings This study examined the effectiveness of government spending in Botswana, within an ARDL framework from 1985 to 2016. To achieve this, the analysis hinged on both the aggregate and disaggregated levels. The results of the aggregate analysis suggest that total public expenditure has a negative impact on economic growth in the short run; however, its impact becomes positive over the long run. On disaggregating government spending, the results show that both recurrent and development expenditures have a significant positive short-run impact on growth; however, in the long run, the significant positive impact is only observed for recurrent expenditure. Practical implications The results provide evidence of the diverse effects of government expenditure in the country. In the period under investigation, 73 percent of total government expenditure in Botswana was recurrent in nature, whereas 23 percent was related to development. From the results, it can be observed that although the recurrent expenditure has contributed to increased growth and must be encouraged, it is also pertinent for the Botswana Government to endeavor to place more emphasis on productive development expenditure in order to enhance short- and long-term growth. Further, there is a need to strengthen the growth-enhancing structures and to prioritize the scarce economic resources toward productive spending and ensuring continued proper governance over such expenditures. Originality/value The study provides empirical evidence on the effectiveness of government spending in a small open, resource-reliant middle-income SSA economy and argues that the effectiveness of public spending must be assessed not only against the amount of the expenditure but also on the type or composition of the expenditure. The study contributes to the scant empirical literature on Botswana by employing the ARDL approach to cointegration technique in estimating the long- and short-run impact of government expenditure on economic growth between 1985 and 2016.

scholarly journals The Asymmetric Influence of Financial Development on Economic Growth in Kenya: Evidence From NARDL

SAGE Open ◽  
2020 ◽  
Vol 10 (1) ◽  
pp. 215824401989407 ◽  
Author(s):  
Hao Chen ◽  
Duncan O. Hongo ◽  
Max William Ssali ◽  
Maurice Simiyu Nyaranga ◽  
Consolata Wairimu Nderitu
Keyword(s):  
Economic Growth ◽  
Financial Development ◽  
Government Spending ◽  
Capital Accumulation ◽  
Research Question ◽  
Government Expenditure ◽  
Model Specification ◽  
Long Run ◽  
Short Run ◽  
Auto Regressive

This study analyzed the asymmetric effects of financial development on economic growth using a model augmented with inflation and government expenditure asymmetries to inform model specification. The research question used entails, Do their asymmetry changes significantly influence growth? Using the nonlinear auto-regressive distributive lag (NARDL), the most significant results posit that positive shocks in financial development in the short run and its negative shocks in the long run increase and decrease economic growth, respectively. Regarding inflation, its positive (negative) shocks in both runs, respectively, reduce (increase) economic growth. In comparison, positive shocks in financial development that spur growth in the short run and negative shocks in financial development (government expenditure) that increase (reduce) growth are the most domineering effects as the rest of the shocks insignificantly affect growth. Results clearly demonstrate to an environment steered by stable and sustainable inflation that regulated government expenditure and comprehensive financial system deepening would positively cause economic growth. Therefore, appropriate policies that favor low inflation and reduced government spending, expansion of feasibly reformed financial institutions, capital accumulation, and increased resource mobilization should be instituted if real growth is to positively happen.

Exchange Rate and Economic Growth

2017 ◽  
Vol 12 (1) ◽  
pp. 42-64 ◽  
Author(s):  
Mohammad A. Razzaque ◽  
Sayema Haque Bidisha ◽  
Bazlul Haque Khondker
Keyword(s):  
Economic Growth ◽  
Exchange Rate ◽  
Real Exchange Rate ◽  
Development Strategy ◽  
Analytical Framework ◽  
Policy Option ◽  
Exchange Rate Policy ◽  
Long Run ◽  
Exchange Rate Movements ◽  
Short Run

This article aims to understand the effects of exchange rate movements on economic growth in Bangladesh. Using a suitable analytical framework to derive an empirical specification, we construct a real exchange rate series and employ cointegration techniques to determine the output response to Bangladeshi currency depreciations. Our results suggest that in the long run, a 10 per cent depreciation of the real exchange rate is associated with, on average, a 3.2 per cent rise in aggregate output. However, a contractionary effect is observed in the short run so that the same magnitude of real depreciation would result in about a half per cent decline in GDP. While the long-run expansionary effect of real depreciations may be appealing for considering exchange rate policy as a development strategy, the likelihood of rising inflationary pressures needs to be kept in mind while pursuing this policy option.

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