scholarly journals Causality Tests and the Relative Effectiveness of Monetary and Fiscal Policies in Pakistan

1992 ◽  
Vol 31 (4II) ◽  
pp. 759-769
Author(s):  
Muhammad Hussain
Keyword(s):  
Monetary Policy ◽  
Economic Activity ◽  
Relative Effectiveness ◽  
Government Expenditure ◽  
Annual Data ◽  
Fiscal Policies ◽  
Money Stock ◽  
Causality Tests ◽  
Relevant Variables ◽  
Total Government Expenditure

The Granger and the Sims causality tests as applied to annual data from Pakistan for the period 1971-72 to 1989-90, help us in arriving at identical conclusions even though in the former test growth rates of the relevant variables were used and in the latter natural logged and filtered variables were used. Both tests detected unidirectional causality running from monetary variables (monetary base and money stock) to nominal GNP in Pakistan for the period under study. Both tests also suggest that there is unidirectional causality running from nominal GNP to the total government expenditure in Pakistan for the period under study. The findings of the study suggest that changes in monetary variables do exert their influence on economic activity, represented by the nominal GNP, in Pakistan. The results of the study also provide some evidence that changes in total government expenditure rather than causing changes in the nominal GNP in Pakistan, are rather influenced by the changes in the nominal GNP. Thus, the findings of the study suggest that the monetary policy was relatively more effective than the fiscal policy in influencing the nominal GNP in Pakistan, during the period under study.

scholarly journals Relative Effectiveness of Monetary and Fiscal Policies on Output Stabilization in Developing Countries: Evidence from Rwanda

2017 ◽  
Vol 10 (1) ◽  
pp. 220
Author(s):  
Kabanda Richard ◽  
Peter W. Muriu ◽  
Benjamin Maturu
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Relative Effectiveness ◽  
Variance Decomposition ◽  
Var Model ◽  
Fiscal Policies ◽  
Impulse Responses ◽  
Exogenous Variables ◽  
Output Stabilization ◽  
The Government

The aim of this study was to explain the relative effectiveness of monetary and fiscal policies in explaining output in Rwanda. The study used a sample of quarterly data for the period 1996-2014. Applying a recursive VAR, the study used 12 variables, including 5 endogenous and 7exogenous variables to the benchmark model and other two specifications were attempted to capture the true contribution of monetary and fiscal policies to variations in nominal output. Obtained results using impulse responses and variance decomposition provide evidence that monetary policy is more effective than fiscal policy in explaining changes in nominal output in Rwanda. In addition, monetary policy explains better output when the VAR model contains domestic exogenous variables than when they are not included, suggesting the relevance of including domestic exogenous variables in VAR specification of monetary and fiscal policies effectiveness on economic variables. Another suggestion is that in order to achieve higher growth, the government of Rwanda should rely more on monetary policy as compared to fiscal policy.

scholarly journals RELATIVE EFFECTIVENESS OF INDONESIAN POLICY CHOICES DURING FINANCIAL CRISIS

2012 ◽  
Vol 14 (2) ◽  
pp. 177-219 ◽  
Author(s):  
Tumpak Silalahi ◽  
Tevy Chawwa
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Financial Crisis ◽  
Global Financial Crisis ◽  
Relative Effectiveness ◽  
Government Expenditure ◽  
Jel Classification ◽  
Exit Strategy ◽  
Economic Output ◽  
The Impact

The objective of this paper is to review the impact of crisis and policy measures taken during the crisis, to evaluate the effectiveness of those measures and to analyze the exit strategy in Indonesia. The econometric model was used to evaluate the impact of monetary and fiscal policy to economic output using quarterly data from 1990 - 2010. The result shows that monetary and fiscal policies have significant impact to economic output. In the short run the changes in real GDP is significantly affected by changes in real monetary supply in the previous three quarter and real fiscal expenditures. The lesson learned from this research among other are that cooperation and coordination among the policy makers and the timely responses are very important in tackling the crisis; an effective conventional monetary policy in normal times may become less effective in a crisis thus unconventional monetary policy indeed necessary as timely policy response and the improvement for more timely disbursement of government expenditure is important to increase the effectiveness of this policy to stimulate economic output. Moreover, several Indonesian exit strategy and policies to face future challenges are very important to reach the ultimate objective of sustainable economic growth while maintaining macroeconomic stability. JEL Classification : E52, E62, E63Keywords: monetary policy, fiscal policy, financial sector policy, global financial crisis.

Money and Economic Activity in Developing Countries: Evidence Based on Cointegration and Causality Tests

1997 ◽  
Vol 41 (1) ◽  
pp. 70-82 ◽  
Author(s):  
Oluwole Owoye
Keyword(s):  
Developing Countries ◽  
Economic Activity ◽  
Real Income ◽  
Annual Data ◽  
Evidence Based ◽  
Significant Information ◽  
Monetary Aggregates ◽  
Nominal Income ◽  
Causality Tests ◽  
Domestic Credit

This paper examines whether or not the fluctuations in monetary and credit aggregates contain useful information about subsequent future movements in nominal or real income in 10 developing countries. Using annual data covering the 1960–1990 period, empirical results showed that narrow (Ml) and broad (M2) monetary aggregates as well as domestic credit (DCR) contain statistically significant information about future movements in nominal income in some of the developing countries examined, while either M1 or M2 or DCR does in some other countries. However, when nominal income is decomposed into its real income and price components, the results suggest that these aggregates contained no statistically significant information about future movements in real income in nearly all the developing countries in the sample.

scholarly journals Multivariate Analysis on the Effectiveness of Monetary and Fiscal Policies in Fiji

2020 ◽  
Author(s):  
Jauhari Dahalan ◽  
T.K. Jayaraman
Keyword(s):  
Relative Effectiveness ◽  
Government Expenditure ◽  
National Income ◽  
Error Variance ◽  
Fiscal Policies ◽  
Vector Autoregressive Model ◽  
Monetary Policies ◽  
Vector Autoregressive ◽  
Cointegrating Vector ◽  
The One

By utilising a Cointegrating Vector Autoregressive Model, this paper assesses the relative effectiveness the fiscal and monetary policies on growth. It is observed that government expenditure has the strongest effect on Fiji’s national income which significantly explains Fiji’s GDP error variance even after a three year period with regard to the effect of shocks, we observed that the national income impulse respons to the one standard error shock among all macroeconomic variables, i.e. government expenditure and foreign assets, which is not permanent but transitory.  

scholarly journals RELATIVE EFFECTIVENESS OF INDONESIAN POLICY CHOICES DURING FINANCIAL CRISIS

2012 ◽  
Vol 14 (2) ◽  
pp. 187-228
Author(s):  
Tumpak Silalahi ◽  
Tevy Chawwa
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Financial Crisis ◽  
Global Financial Crisis ◽  
Relative Effectiveness ◽  
Government Expenditure ◽  
Jel Classification ◽  
Exit Strategy ◽  
Economic Output ◽  
The Impact

The objective of this paper is to review the impact of crisis and policy measures taken during the crisis, to evaluate the effectiveness of those measures and to analyze the exit strategy in Indonesia. The econometric model was used to evaluate the impact of monetary and fiscal policy to economic output using quarterly data from 1990 - 2010. The result shows that monetary and fiscal policies have significant impact to economic output. In the short run the changes in real GDP is significantly affected by changes in real monetary supply in the previous three quarter and real fiscal expenditures. The lesson learned from this research among other are that cooperation and coordination among the policy makers and the timely responses are very important in tackling the crisis; an effective conventional monetary policy in normal times may become less effective in a crisis thus unconventional monetary policy indeed necessary as timely policy response and the improvement for more timely disbursement of government expenditure is important to increase the effectiveness of this policy to stimulate economic output. Moreover, several Indonesian exit strategy and policies to face future challenges are very important to reach the ultimate objective of sustainable economic growth while maintaining macroeconomic stability. JEL Classification : E52, E62, E63Keywords: monetary policy, fiscal policy, financial sector policy, global financial crisis.

scholarly journals US Monetary-Fiscal Policy Mix Evidence from a Quatrovariate VECM

2011 ◽  
Author(s):  
George K. Zestos ◽  
Andrew N. Geary ◽  
Kevin S. Cooksey
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
National Income ◽  
Fiscal Policies ◽  
Federal Funds Rate ◽  
Vector Error Correction ◽  
Bond Yield ◽  
Causality Tests ◽  
Government Deficit ◽  
Real National Income

This study investigates the effectiveness of monetary and fiscal policies in the US by employing cointegration and a quatrovariate Vector Error Correction Model together with Granger causality tests. Two models are estimated: (i) nominal national income, the ten-year government bond yield, and two policy variables, the federal government deficit and the federal funds rate; (ii) real national income, and the other same three variables. Monetary and fiscal policies are jointly ineffective in influencing nominal national income. However, monetary and fiscal policies are jointly effective in influencing real national income. In contrast to the first model, only monetary policy was found to be reactive to changes in real national income and the long-term interest rate. The asymmetric responses of the two policies to changes in real economic activity are attributed to the fact that monetary policy is much more efficient in promptly responding to changes in economic conditions than fiscal policy.  

scholarly journals Government Expenditure and its Effect on the Industrial Sector in Nigeria

2021 ◽  
pp. 81-92
Author(s):  
Sydney Ozuzu ◽  
Araniyar Isukul
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Capital Expenditure ◽  
Government Expenditure ◽  
Industrial Sector ◽  
Fiscal Policies ◽  
Industrial Sectors ◽  
The Right ◽  
The Cost

This study examined the effect of government expenditure on the growth of the industrial sector in Nigeria. A regression analysis was applied in the analysis of the data. The study found that government capital expenditure has positive and significant effect on the industrial sector; tax has positive and significant effect on the industrial sector; monetary policy rate has positive and significant effect on the growth of the industrial sector, while real interest rate has a negative and no significant effect on the growth of the industrial sector. From the findings, we conclude that government policy has significant effect on the growth of the Nigerian industrial sector. It recommends that government fiscal policies such as public expending should be directed toward improving the quality of infrastructures in the country, especially the power sector, so that the cost of production can reduce. Government should examine should create an enabling environment with the right infrastructure, improve the security situation and reduce the epileptic power supply related issues. Also, government should examine its monetary policy variables such as interest rate and monetary policy rate. Furthermore, to promote growth, government should develop the industrial sectors of the economy through its capital expenditure.

scholarly journals Relative effectiveness of monetary and fiscal policies on output growth in Turkey: an ARDL bounds test approach

Equilibrium ◽  
2018 ◽  
Vol 13 (3) ◽  
pp. 391-409 ◽  
Author(s):  
Mustafa Özer ◽  
Veysel Karagöl
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Granger Causality ◽  
Structural Break ◽  
Relative Effectiveness ◽  
Value Added ◽  
Output Growth ◽  
Fiscal Policies ◽  
Bounds Testing ◽  
Policy Variable

Research background: Effects of monetary and fiscal policy on output growth has been one of the major topics that economists have been investigating. Monetary and fiscal policies are tools for economists and policymakers to correctly direct the economy and facilitate the growth and development of the country. Accordingly, it is critically important for policy-makers in the area of economy to study the efficiency and the effectiveness of such policies. But, so far, there has been no generally accepted evidence suggesting the effectiveness of either the policy in Turkey or around the world. Instead, the dominance of either policy is subject to a change period to period and country to country. Purpose of the article: The purpose of this study is to analyze the growth effectiveness of fiscal and monetary policies and then determine which of these two policies is more powerful in promoting economic growth in Turkey over the period 1998 and 2016. Methods: To investigate the growth effectiveness of monetary and fiscal policies, we use some of the time series econometric techniques, such as ARDL Bounds testing, structural break unit root tests and Granger causality tests. Findings & Value added: Monetary policy variable is creating only short-run effects on growth; but, it’s not causing any Granger causality on it. On the other hand, fiscal policy variable has a long-run significant effect and causing to growth. Thus, the fiscal policy seems to be more effective than monetary policy during examination period, implying the rethinking the implementation of both policies in Turkey. To the best of our knowledge, this study is the first attempt to investigate the relative effectiveness of economic policies on growth in Turkey in terms of both methods used and period chosen.

scholarly journals Relative Effectiveness of Fiscal and Monetary Policies in Nigeria

2016 ◽  
Vol 2 (1) ◽  
pp. 117
Author(s):  
David Iheke Okorie ◽  
Manu Adasi Sylvester ◽  
Dak-Adzaklo Cephas Simon-Peter
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Positive Impact ◽  
A Priori ◽  
Relative Effectiveness ◽  
Fiscal Policies ◽  
Policy Effects ◽  
Distributed Lag ◽  
Long Run ◽  
Short Run

This study employs the auto regressive distributed lag (ARDL) model to ascertain the relative effectiveness of monetary and fiscal policies in Nigeria using a quarterly time-series from 1981-2012. From our analysis, it discovered that monetary and fiscal policies both have significant positive impact income. This conforms to a priori expectation and we discovered that monetary policy effects income faster than fiscal policy. In the short run, monetary policy effects income more than fiscal policy but the reverse is the case for the long run. Total impact of fiscal policy is higher than that of monetary policy. This study supports the use of both policies to achieve change in income but this depends on the objective the authorities want to achieve.

scholarly journals On the Fiscal Policy in Malaysia: An Econometrical Analysis Between the Revenue – and Expenditure

2020 ◽  
Vol 11 (1) ◽  
pp. 1
Author(s):  
Marco Mele ◽  
Angelo Quarto ◽  
Cristiana Abbafati
Keyword(s):  
Government Spending ◽  
Public Expenditure ◽  
Annual Data ◽  
Government Revenue ◽  
Fiscal Policies ◽  
Budget Deficits ◽  
Causality Tests ◽  
Granger Causality Tests ◽  
Tax Hypothesis ◽  
The Relationship

This study aims to assess the relationship between government spending and government revenue in Malaysia. The study of the causal relationship between revenue and public expenditure has important implications for the choices of fiscal policies in the field of public finances. So, this study uses annual data for the period between 1985 - 2016 with Zivot and Andrews (1992) methods and Granger causality tests. Our results sustain the spend-and-tax hypothesis highlights how the increase in tax pressure is the wrong method to contain budget deficits. In fact, in addition to reducing the disposable income of households, a tax policy of this type would reduce savings. Therefore, also the investment. All this would hurt Malaysia’s economic growth.

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