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

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.

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Economic Growth, Policies and Influencing Factors: The Case of Albania

European Journal of Economics and Business Studies ◽

10.26417/ejes.v4i1.p107-115 ◽

2016 ◽

Vol 4 (1) ◽

pp. 107

Author(s):

Eleni Vangjeli ◽

Anila Mancka

Keyword(s):

Economic Growth ◽

Monetary Policy ◽

Fiscal Policy ◽

Interest Rates ◽

Empirical Analysis ◽

Influencing Factors ◽

Fiscal Policies ◽

The Government ◽

High Level ◽

The Empirical Analysis

Monetary and fiscal policies are two policies that the government could use to keep a high level of growth, with a low inflancion. Fiscal policy has its initial impact on the stock market, while monetary policy in market assets. But, given that the goods and active markets are closely interrelated, both policies, monetary as well as fiscal have impact on the economy, increasing the level of product through the reduction of interest rates. In our paper we will show how functioning monetary and fiscal policies. But also in our paper we will analyze the different factors which have affected the economic growth of the country. The focus of our study is the graphical and empirical analysis of economic growth, policies and influencing factors. For the empirical analysis we have used data on the economic growth in Albania for 1996– 2014.

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Monetary Policy

10.1093/oso/9780198854715.003.0005 ◽

2021 ◽

pp. 185-224

Author(s):

Juan Antonio Morales ◽

Paul Reding

Keyword(s):

Monetary Policy ◽

Central Bank ◽

Commodity Price ◽

Fiscal Policies ◽

External Shocks ◽

Output Stabilization ◽

Fiscal Dominance ◽

Price Hike ◽

The Government ◽

Flexible Exchange Rates

The chapter explores two significant challenges faced by central banks in LFDCs: fiscal dominance and external shocks. Monetary policy can be dominated by governments that rely on seigniorage generated by the central bank or impose other constraints to facilitate the financing of persistent deficits. The chapter discusses and illustrates for several countries the concept of seigniorage, examines the mechanisms of fiscal dominance, and assesses its consequences. External oil and food price shocks also raise several monetary policy challenges. Using a theoretical approach, the chapter explores the trade-off between price and output stabilization that the central bank faces after a commodity price hike. The analysis takes into account whether the country is a net exporter or a net importer and whether it is on fixed or on flexible exchange rates. It also discusses coordination issues between monetary and fiscal policies, in particular when windfall gains accrue to the government.

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

Equilibrium ◽

10.24136/eq.2018.019 ◽

2018 ◽

Vol 13 (3) ◽

pp. 391-409 ◽

Cited By ~ 1

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.

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Relative Effectiveness of Fiscal and Monetary Policies in Nigeria

Asian Journal of Social Science Studies ◽

10.20849/ajsss.v2i1.129 ◽

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.

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The Interaction of Monetary and Fiscal Policy in the Countries of the Visegrad Group

Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis ◽

10.11118/actaun201462020373 ◽

2014 ◽

Vol 62 (2) ◽

pp. 373-381

Author(s):

Jan Janků ◽

Stanislav Kappel

Keyword(s):

Monetary Policy ◽

Fiscal Policy ◽

Interest Rates ◽

Dominant Role ◽

Multivariate Regression Analysis ◽

Successful Implementation ◽

Fiscal Policies ◽

The Government ◽

Visegrad Group

Coordination of or at least absence of conflict between monetary and fiscal policies are key to the successful implementation of economic policy. The article aims to use reaction functions to assess whether the monetary and fiscal policies in the countries of the Visegrad Group are in coordination or in conflict and which variables influence their decisions. The central bank is the representative of monetary policy, which has interest rates as its instrument, and the government as the representative of the fiscal policy which has change revenue or spending as a share of GDP as instrument. To obtain the results, multivariate regression analysis is used. The research period is based on quarterly observations from first quarter of 2000 to the fourth quarter of 2012. Stabilizing role of monetary policy and in some countries also partially stabilizing role of fiscal policy has been found. Another result was that in the case of the Czech Republic, Slovakia and Poland, monetary policy appears to play the dominant role, whereas fiscal policy plays dominant role in Hungary. In the case of Slovakia, some different results may be due to Slovakia’s participation in ERM II, which led to the monetary policy, in addition to maintaining price stability, also aiming to maintain a fixed exchange rate and the subsequent entry of Slovakia into the Eurozone and the de facto loss of autonomous monetary policy.

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Strategi Dalam Menciptakan Kesejahteraan Masyarakat Melalui Rekonstruksi APBN: Telaah kritis dari Kitab Al-Amwal

JURNAL ILMIAH EKONOMI ISLAM ◽

10.29040/jiei.v7i2.2057 ◽

2021 ◽

Vol 7 (2) ◽

Author(s):

Syamsuri Syamsuri

Keyword(s):

Monetary Policy ◽

Qualitative Method ◽

Research Approach ◽

Fiscal Policies ◽

Study Approach ◽

State Revenue ◽

Library Research ◽

Character Study ◽

Import And Export ◽

The Government

There are at least two approaches taken by the government to deal with the problem of poverty or create prosperity, namely through fiscal policy and monetary policy. In this article, the author will examine the fiscal policies that should be carried out by the government using the reallocation method of state revenue and expenditure funds or the so-called APBN. Several Muslim figures have studied the problem solving, such as, As-Syaibani and Umar bin Abdul Aziz. However, the author focuses on the contribution of Muslim scholar who was born from Byzantine descent in 154/1858, namely Abu Ubaid, his brilliant idea as outlined in the book Al-Amwal in order to create the mashlahat of society in a country. By using a qualitative method with the library research approach and assisted by the final character study approach, it can be concluded that some strategies according to Abu Ubaid are a solution in creating social welfare, namely Zakat, fa'I, khumus, kharja, and jizyah. As well as regarding the import and export of goods, Abu Ubaid uses a strategy of not having zero tariffs in international trade, excise on staples is cheaper, and there are certain limitations to be subject to excise. This means that when goods enter into a country, there is a cut or excise that enters zakat.

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Testing for the Effectiveness of Inflation Targeting in India: A Factor Augmented Vector Autoregression (FAVAR) Approach

Journal of Central Banking Theory and Practice ◽

10.2478/jcbtp-2020-0042 ◽

2020 ◽

Vol 9 (3) ◽

pp. 163-182

Author(s):

P Jithin ◽

Babu M Suresh

Keyword(s):

Principal Component Analysis ◽

Monetary Policy ◽

Money Supply ◽

Inflation Targeting ◽

Vector Autoregression ◽

Principal Component ◽

Var Model ◽

Price Stability ◽

Impulse Responses ◽

Model Benchmark

AbstractEmploying Factor Augmented Vector Autoregression (FAVAR) model where factors are obtained using the principal component analysis (PCA) and the parameters of the model are estimated using Vector Autoregression framework, we analyse how changes in monetary policy variables impact inflation, output, money supply, and the financial sector in India. Our results for the period 2001:04 to 2016:03 show that the benchmark FAVAR model showed more reliable results than baseline VAR model. Benchmark FAVAR model shows the existence of weak ‘liquidity puzzle’ in India. The impulse responses from the FAVAR approach reveal that monetary policy is more efficient in explaining the variations in inflation rather than stimulating output indicating its effectiveness in attaining the objective of price stability.

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RELATIVE EFFECTIVENESS OF INDONESIAN POLICY CHOICES DURING FINANCIAL CRISIS

Buletin Ekonomi Moneter dan Perbankan ◽

10.21098/bemp.v14i2.84 ◽

2012 ◽

Vol 14 (2) ◽

pp. 177-219 ◽

Cited By ~ 1

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.

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The Relationship Between External Debt, Economic Growth, Unemployment and National Expenditure in Viet Nam

Journal of Economics and Management Sciences ◽

10.30560/jems.v1n2p129 ◽

2018 ◽

Vol 1 (2) ◽

pp. p129

Author(s):

Anh Tru Nguyen

Keyword(s):

Economic Growth ◽

Monetary Policy ◽

Fiscal Policy ◽

External Debt ◽

Viet Nam ◽

Credit Growth ◽

Short Run ◽

The Government ◽

The Relationship ◽

Macroeconomic Stability

The article examines the relationship between external debt, economic growth, unemployment and national expenditure in Viet Nam between 1987 and 2016. We found that the influence of a variable on other variables varies in the short run. We found that there are directional relationships between GDP and external debt and GDP and national expenditure. We also found that there are directional relationships between unemployment and external debt, GDP, and national expenditure. Results addressed directional relationships between national expenditure and external debt and GDP. There are two co-integrations among variables. In order to sustain macroeconomic stability in Viet Nam, fiscal policy should be re-examined to meet large development needs and monetary policy should be tightened to reduce credit growth. Specifically, external debt should be effectively managed by the government because an increase in external debt leads to a decrease in GDP and a growth of unemployment. Moreover, GDP should be facilitated to reduce unemployment in the economy. Lastly, unemployment needs to be controlled because it generates a boom of national expenditure and vice versa.

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Tax Cuts And Interest Rate Cuts: An Empirical Comparison Of The Effectiveness Of Fiscal And Monetary Policy

Journal of Business & Economics Research (JBER) ◽

10.19030/jber.v2i8.2906 ◽

2011 ◽

Vol 2 (8) ◽

Cited By ~ 1

Author(s):

Tricia Coxwell Snyder ◽

Donald Bruce

Keyword(s):

Monetary Policy ◽

Fiscal Policy ◽

Error Correction ◽

Relative Effectiveness ◽

Explanatory Power ◽

Tax Rates ◽

Stabilization Policy ◽

Federal Funds ◽

Federal Funds Rate ◽

Fiscal And Monetary Policy

Can expansionary fiscal or monetary policy stimulate the U.S. economy in light of recent events?  Using an Error-Correction-Vectorautoregression, we examine the relative effectiveness of both types of governmental stabilization policy. Unlike previous studies, we use a more general error correction vectorautoregression (ECM) approach.  Our focus is on determining the relative explanatory power of measures of monetary policy (M2 and the Federal Funds Rate) and fiscal policy (marginal income tax rates and government spending) in explaining movements in consumption, investment, and output.  Results suggest that monetary policy is relatively more powerful than fiscal policy.

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