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.

SHORT-RUN AND LONG-RUN IMPACT OF INFLATION, UNEMPLOYMENT, AND ECONOMIC GROWTH TOWARDS POVERTY IN INDONESIA: ARDL APPROACH

2019 ◽  
Vol 2 (1) ◽  
pp. 15
Author(s):  
Ahmadi Murjani
Keyword(s):  
Economic Growth ◽  
Poverty Alleviation ◽  
Macroeconomic Variables ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Long Run ◽  
Ardl Approach ◽  
Short Run ◽  
The Government ◽  
The Impact

 Poverty alleviation has become a vigorous program in the world in recent decades. In line with the efforts applied by the government in various countries to reduce poverty, some evaluations have been practised. The impacts of macroeconomic variables such as inflation, unemployment, and economic growth have been commonly employed to be assessed for their impact on the poverty. Previous studies in Indonesia yielded mix results regarding the impact of such macroeconomic variables on the poverty. Different methods and time reference issue were the suspected causes. This paper aims to overcome such problem by utilising the Autoregressive Distributed Lag (ARDL) equipped with the latest time of observations. This paper finds in the long-run, inflation, unemployment, and economic growth significantly influence the poverty. In the short-run, only inflation and economic growth are noted affecting poverty significantly. 

scholarly journals Taxation, government spending and economic growth: The case of Bulgaria

2021 ◽  
Vol 7 (3) ◽  
pp. 255-266
Author(s):  
G. Ganchev ◽  
◽  
I. Todorov ◽  
Keyword(s):  
Economic Growth ◽  
Growth Rate ◽  
Tax Revenue ◽  
Gdp Growth ◽  
Real Gdp ◽  
Long Run ◽  
Gdp Growth Rate ◽  
Short Run ◽  
The Impact

The objective of this article is to estimate the impact of three fiscal instruments (direct taxes, indirect taxes, and government expenditure) on Bulgaria’s economic growth. The study employs an autoregressive distributed lag model (ARDL) and Eurostat quarterly seasonally adjusted data for the period 1999–2020. Four control variables (the shares of gross capital formation, household consumption, and exports in GDP as well as the economic growth in the euro area) are included in the model to account for the influence of non-fiscal factors on Bulgaria’s real GDP growth rate. The empirical results indicate a long-run equilibrium relationship between Bulgaria’s economic growth and the independent variables in the ARDL. In the short term, Bulgaria’s real GDP growth rate is affected by its own past values and the previous values of the shares of direct tax revenue, exports, government consumption, and indirect tax revenue in GDP. In the long term, Bulgaria’s economic growth is influenced by its own previous values and the past values of the share of household consumption in GDP and the euro area’s real GDP growth rate. Fiscal instruments can be used to stabilize Bulgaria’s growth in the short run but they are neutral in the long run. The direct tax revenue, government consumption, and indirect tax revenue are highly effective and can be used as tools for invigorating and stabilizing Bulgaria’s economic growth in the short run. However, in the long term, the real GDP growth rate can be hastened only by encouraging domestic demand (final consumption expenditure of households) and promoting exports. This research cannot answer the question of whether flat income taxation stabilizes the economy or not, since it does not separate the impact of tax rate changes from the influence of tax base modifications.

scholarly journals Effect of Money Supply on Inflation in Nepal: Empirical Evidence from ARDL Bounds Test

2021 ◽  
Vol 2 (1) ◽  
pp. 84-98
Author(s):  
Uttam Lal Joshi
Keyword(s):  
Money Supply ◽  
Correction Term ◽  
Policy Makers ◽  
Ardl Bounds Test ◽  
Long Run ◽  
Short Run ◽  
Bounds Test ◽  
Monetary And Fiscal Policy ◽  
Relationship Of ◽  
The Impact

This study explores the long-run and short-run relationship of money supply and inflation in the context of Nepal. Data are extracted from Economic Survey of Nepal since 1964/65 to 2018/19 to obtain the relationship. ARDL Bounds test is used for cointegration test where the dependent variable is inflation and money supply and Indian inflation are taken as independent variables to estimate the model. Result shows the long-run cointegration between the variables reveals long-run relationship and the error correction term is found to be negative (-0.98) and significant (p=0.02). The study suggests that policy makers can reduce the impact of money supply on inflation and should focus on the control of inflation adopting monetary and fiscal policy mechanism. Creeping inflation in the pace of economic growth is desirable and successful cure of inflation will help in stability and growth of the country.  

scholarly journals The Impact of FDI on the Economic Growth of Sri Lanka: An ARDL Approach to Co-integration

2017 ◽  
Vol 3 (1) ◽  
pp. 70-82 ◽  
Author(s):  
Samantha NPG ◽  
Liu Haiyun
Keyword(s):  
Economic Growth ◽  
Sri Lanka ◽  
Manufacturing Sector ◽  
Economic Policies ◽  
Policy Reforms ◽  
Long Run ◽  
Greenfield Investments ◽  
Ardl Approach ◽  
Short Run ◽  
The Impact

The impact of foreign direct investment(FDI) on host country economic growth is a debatable issue in the recent economic literature. The purpose of this study is to examine this issue for a country which practiced comparatively more liberal economic policies within the South Asian region over four decades. The ARDL approach to cointegration is applied to identify long-run relationship and short-run dynamics between selected variables for the period of 1978 to 2015 for Sri Lanka. The empirical result confirms the long run relationship between the variables. FDI is positively correlated with economic growth in the short run and long run, but it is not a significant factor for economic growth in Sri Lanka. Sri Lanka will have to undertake policy reforms related to FDI in order to attract more greenfield investments to boost economic growth creating new job opportunities and expanding exports in the manufacturing sector. These findings would be an example for other small open economies with similar economic characteristics.

scholarly journals Liquidity commonality-economic cycle nexus in emerging Asian economies: An ARDL approach

2021 ◽  
Vol 8 (6) ◽  
pp. 26-39
Author(s):  
Syeda Hina Zaidi ◽  
Keyword(s):  
Economic Growth ◽  
Positive Impact ◽  
Policy Coordination ◽  
Market Liquidity ◽  
Economic Cycle ◽  
Long Run ◽  
Ardl Approach ◽  
Asian Economies ◽  
Short Run ◽  
The Impact

This study investigates the impact of liquidity commonality on the economic cycle for 7 emerging Asian economies over a period of 1997-2018, using Autoregressive Regressive Distributed Lag (ARDL) approach to Cointegration. Gross domestic investment, total consumption expenditure, net trade, and unemployment rate are studied as macro variables in the analysis. The nexus has been discussed both in the short-run and long-run. A significant relationship between economic growth and stock market liquidity commonality is found for large economies including China, India, Indonesia, and Malaysia; however, we found mixed evidence regarding the direction of the relationship for different economies. The aggregate analysis revealed that liquidity commonality has a positive impact on economic growth in the short-run and a negative association in the long-run. As a non-diversifiable risk factor, liquidity co-movement shocks spread the market wide and disrupt the overall functioning of financial markets and eventually affect the economy. For regulators and policymakers and particularly for those in emerging economies, understanding the factors affecting economic cycles and recognizing their dynamics and magnitude is important for policy coordination and market development. Further, the firms in Asian markets operate in legal and regulatory environments distinct from those of firms analyzed in the previous literature. A major knowledge gap pertaining to Asian emerging markets serves as the primary motivation for this study.

scholarly journals An Empirical Investigation Between Money Supply, Inflation, Capital Expenditure and Economic Growth in Nepal

2021 ◽  
Vol 3 (1) ◽  
pp. 23-39
Author(s):  
Tilak Singh Mahara
Keyword(s):  
Economic Growth ◽  
Money Supply ◽  
Capital Expenditure ◽  
Policy Instruments ◽  
Long Run ◽  
Ardl Approach ◽  
Ministry Of Finance ◽  
Sustainable Economic Growth ◽  
Bound Test ◽  
The Relationship

Background: Money supply, inflation, and capital expenditure along with others are major issues of consideration for policymakers in developing countries given the need to spark internal demand and to encounter the government’s massive fiscal obligations to alleviate poverty and achieve sustainable economic growth. Like other economies, the economic performance of Nepal is also based on these macroeconomic variables.  Objective: The principal objective of the study is to explore the association between money supply, inflation, capital expenditure, and economic growth in Nepal. Method: The study applies the ARDL approach to co-integration to check the relationship between selected variables. The bound test is carried out to see the relationship between variables. Result: The empirical findings of the study show that there is a significant long-run positive relationship between money supply, capital expenditure, and growth. There is a unidirectional causation from money supply and capital expenditure to real economic growth in Nepal. Conclusion: The study concludes that an increase in money supply, capital expenditure, and controlling inflation help to increase the long-run real economic growth of Nepal. Nepal Rastra Bank has to emphasize monetary policy instruments that help to increase the money supply in the long run and the Ministry of Finance (MoF) should be encouraged to increase spending on capital overheads to broaden and enhance the growth of the economy.

scholarly journals Impact of economic growth on international reserve holdings in Brazil

2017 ◽  
Vol 37 (3) ◽  
pp. 605-614 ◽  
Author(s):  
MOHAMMAD KASHIF ◽  
P. SRIDHARAN ◽  
S. THIYAGARAJAN
Keyword(s):  
Economic Growth ◽  
Error Correction ◽  
Correction Term ◽  
International Reserves ◽  
Speed Of Adjustment ◽  
Error Correction Term ◽  
Long Run ◽  
Short Run ◽  
Using Data ◽  
The Impact

ABSTRACT This study investigated the impact of economic growth on Brazilian international reserves holdings in the context of Error Correction Mechanism using data over the 1980-2014 period. The results reveal that economic growth is highly significant. From the estimation of our model, we argue that economic growth and international reserves have positive long run relationship. Error correction estimates validated our model for error correction term is negative and statistically significant. Besides, our model suggested that economic growth has short run relationship too. The speed of adjustment is more than 40% which indicated that error correction term corrects previous year disequilibrium at the rate of 40.4%.

scholarly journals REVISITING THE EXPORT-LED GROWTH HYPOTHESIS USING ARDL APPROACH: EMPIRICAL EVIDENCE FROM KAZAKHSTAN

2021 ◽  
Vol 7 (1) ◽  
Author(s):  
Imtiyaz Ahmad Shah ◽  
Shabir Ahmad Najar ◽  
Bilal Ahmad Khan
Keyword(s):  
Correction Term ◽  
Labour Force ◽  
Speed Of Adjustment ◽  
Independent Variables ◽  
Long Run ◽  
Ardl Approach ◽  
Short Run ◽  
Per Capita ◽  
The Impact ◽  
Growth Hypothesis

The paper aims to examine the impact of exports on Kazakhstan's economic growth. The effect of exports is determined through a neoclassical production function, examining exports' role after controlling the labour force and capital formation. The analysis is based ARDL model on testing for the short-run and long-run effects of independent variables. The long-run coefficient of exports is 0.38, while the short-run coefficient is 0.28 and statistically significant. Therefore, exports impact positively on G.D.P. per capita in both the short-run and long-run. Also, coefficient of error correction term (E.C.M.) is negative and statistically significant, showing the speed of adjustment towards equilibrium from short-run to long-run. Therefore, Kazakhstan's government should focus on increasing the exports that can increase the G.D.P. per capita better.

scholarly journals The Impact of Output Volatility on CO2 Emissions in Turkey: Testing EKC Hypothesis with Fourier Stationarity Test

2021 ◽  
Author(s):  
Murat Can Genç ◽  
Aykut Ekinci ◽  
Burchan Sakarya
Keyword(s):  
Economic Growth ◽  
Kuznets Curve ◽  
Output Volatility ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Real Gdp ◽  
Long Run ◽  
Short Run ◽  
Stationarity Test ◽  
The Impact

Abstract This study uses the environmental Kuznets curve (EKC) approach to determine the dynamic short- and long-term impacts of the volatility of economic growth (VOL) on carbon dioxide (CO2) emissions in Turkey from 1980 to 2016. The results of the Autoregressive Distributed Lag (ARDL) approach indicate that there is a long-run relationship between CO2, per capita real GDP, and VOL. The coefficients obtained from the ARDL estimation indicate that economic growth increases CO2 emissions, but VOL decreases CO2 emissions in the long run. However, the coefficients obtained from the ARDL error correction model show that VOL increases CO2 emissions in the short run. We also find that the EKC is valid in Turkey.

scholarly journals Financial deepening and economic growth in nigeria (1981-2012): A managerial economic perspective

2014 ◽  
Vol 4 (4) ◽  
pp. 120-131 ◽  
Author(s):  
Anthony Igwe ◽  
Chukwudi Emmanuel Edeh ◽  
Wilfred Isioma Ukpere
Keyword(s):  
Economic Growth ◽  
Private Sector ◽  
Money Supply ◽  
Study Data ◽  
Series Data ◽  
Equilibrium Path ◽  
Financial Deepening ◽  
Long Run ◽  
Short Run ◽  
The Impact

The objective of this study is to determine the impact of financial deepening on economic growth in Nigeria. The supply leading hypothesis was adopted as the theoretical framework of the study. Data for analysis was for the period 1981-2012 obtained from the Central Bank of Nigeria Statistical Bulletin. The explanatory variables were logged values of broad money supply/GDP and Credit to the private sector/GDP. The times series data were tested for stationarity using the ADF unit root tests of stationarity and were found to be stationary at first difference. The Engle-Granger Cointegration technique and Error correction model were used for the test of long run relationship. Findings reveal that money supply (MS) is positive and weakly significant in determining economic growth. However, credit to the private sector was negative and not significant in the short run. The speed of adjustment of the ECM is 25.51%. This implies that if there are short run fluctuations, GDP will converge to its long run equilibrium path at a speed of about 25.51% in each period .The conclusion is that financial deepening does not have the desired impact on economic growth in Nigeria. Hence, there is a need for increase and improvement in access to private credit to enhance economic growth and investment.

Sign in / Sign up

Export Citation Format

Share Document