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The Impact of Fiscal Policy, Monetary Policy and Trade Openness on the Economic Growth; Case of Selected SAARC Countries.

Year 2021, Volume: 3 Issue: 1, 132 - 145, 25.06.2021

Abstract

In this study, we investigated the impact of fiscal policy, monetary policy, and trade policy on selected SAARC ( Afghanistan, Pakistan, Bangladesh, India, and Sri Lanka) countries' economic growth. . For the mentioned analysis data were used for the period 2006-2017. Both government expenditures and broad money supply have a positive and significant impact on economic growth. The impact of trade openness is negative and significant, says the study. The study concludes that the impact on growth is greater than the impact of monetary policy. The authors conclude that the decomposition variance shock in the GDP, in the long run, was not affected much by other variables relative to the short run. Furthermore, as per the Causality test results through the VAR analysis, growth has a double directional causality relationship with broad money growth and government expenditures. One side relationship with the trade openness means trade openness causes the GDP per capital but GDP per Capital does not. Broad money and government expenditures double direction relationship but have no causality relationship with openness.

References

  • Aamir, Muhammad., Shah, Namatullah., Rahpoto, Muhammad Saleemm.,and Shaikh, Faiz. (2011). New Growth Theories and Trade Liberalization: Measurement of effects of technology transfer on Pakistan economy. Modern Applied Science, 85-93.
  • Abbas, Shujaat. (2014). Trade Liberalization and its Economic Impact on Developing and Least Developed Countries. Journal of International Trade Law and Policy, 13(3), 215-221.
  • Abdon Arneyln, GemmaB.Lee Minsoo, Estrada., & Donghyun, Park. (2014). Fiscal Policy and Growth in Developing Asia. Retrieved 2 8, 2018, from Asian Development Bank: https://www.google.com/search?q=Fiscal+Policy+and+Growth+in+Developing+Asia+Abdon%2C+A.%2C+Estrada%2C+G.B.%2C+Lee%2C+M.%2C+%26+Park%2C+D.&sxsrf=ALeKk004iwBxq5A1xK68RkRsHH9Kvg9rcA%3A1617879100686&ei=POBuYP-kKcT2sAfxvaAo&oq=Fiscal+Policy+and+Growth+in+Devel.
  • Akıncı, Adil., and Tüncer,Güner. (2018). EFFECTIVENESS OF FISCAL POLICY AND MONETARY POLICY IN TURKEY. DUMLUPINAR ÜNİVERSİTESİ SOSYAL BİLİMLER DERGESİ, 120-128.
  • li, Nasir., Qadri, Faisal Sultan., and Jawaid, Sayed Tahsin. (2011). Monetary-Fiscal-Trade Policy and Economic Growth in Pakistan: Time Series Empirical Investigation. International Journal of Economics and Financial Issues, 1(3), 133-138.
  • Ali, Wajahat., and Abdullah, Azrai. (2015). The impact of trade on the economic growth of Pakistan;1980-2010. Global Business and Management Research, 120-129.
  • Al-Masaeed, Abdullah Ali.,& Tsaregorodtsev, Evgeny. (2018). The Impact of Fiscal Policy on the Economic Growth of Jordan. International Journal of Economics and Finance; 018, 145-161.
  • Braşoveanu, Iulian., and Braşoveanu, Laura Obreja. (2008). The Correlation between fiscal policy and Economic Growth. Theoretical and Applied Economics, 19-26.
  • Coe, D. T. (1995). International R&D spillovers. European Economic Review, 859-887.
  • Edward, Sebastian. (1998). Openness, Productivity, and Growth: What Do We Really Know? Economics Journal, 393-398.
  • Esra, K. (2019, December 24). Conditions for VAR Analysis. (A. Q. Khaitr, Interviewer).
  • Freeman, Richard B. (1995). Are Your Wages set in Beijing? Journal of Economic Perspectives, 15-32.
  • Gerson, Philips. (1998). The impact of fiscal variables on Output Growth. IMF working paper.
  • Grey, Charly. (2007). Fiscal Policy and Economic Growth in Europe and Central Asia: An Overview. In T. I. Development, Fiscal Policy and Economic Growth. Washington, DC20433.
  • Huchet, Marilyne., Chantale Le, Mouel Le, Mouel., and Mariana Vijil. (Aug 2011). The relationship between Trade openness and economic erowth; Some New insights to the openness measurement issue. In XIIIème Congrès de l'Association Européenne des Economistes Agricoles (EAAE). Zurich (CH), Switzerland.
  • Karras, G. (2011). Trade openness and economic growth: can we estimate the precise effect. Applied Econometrics and International Development, 3(1), 223-231.
  • Keho, Yaya. (31 March 2017). The impact of trade openness on economic growth: The case of Cote d’Ivoire. GENERAL & APPLIED ECONOMICS, 1-14.
  • Lonela, Popa., and Diana, Codreanu. (2010, February 15). Fiscal Policy and its role in ensuring economic stability. Retrieved December 16, 2019, from https://mpra.ub.uni-muenchen.de/20820/1/FISCAL_POLICY_AND_ITS_ROLE_IN_ENSURING_ECONOMIC_STABILITY.pdf.
  • Lut, M. a. (2015). The impact of monetary policy on the Economic Growth of Cambodia. Journal of Management for Global Sustainable Development, 40-63.

The Impact of Fiscal Policy, Monetary Policy and Trade Openness on the Economic Growth; Case of Selected SAARC Countries.

Year 2021, Volume: 3 Issue: 1, 132 - 145, 25.06.2021

Abstract

In this study, we investigated the impact of fiscal policy, monetary policy, and trade policy on selected SAARC ( Afghanistan, Pakistan, Bangladesh, India, and Sri Lanka) countries' economic growth. . For the mentioned analysis data were used for the period 2006-2017. Both government expenditures and broad money supply have a positive and significant impact on economic growth. The impact of trade openness is negative and significant, says the study. The study concludes that the impact on growth is greater than the impact of monetary policy. The authors conclude that the decomposition variance shock in the GDP, in the long run, was not affected much by other variables relative to the short run. Furthermore, as per the Causality test results through the VAR analysis, growth has a double directional causality relationship with broad money growth and government expenditures. One side relationship with the trade openness means trade openness causes the GDP per capital but GDP per Capital does not. Broad money and government expenditures double direction relationship but have no causality relationship with openness.

References

  • Aamir, Muhammad., Shah, Namatullah., Rahpoto, Muhammad Saleemm.,and Shaikh, Faiz. (2011). New Growth Theories and Trade Liberalization: Measurement of effects of technology transfer on Pakistan economy. Modern Applied Science, 85-93.
  • Abbas, Shujaat. (2014). Trade Liberalization and its Economic Impact on Developing and Least Developed Countries. Journal of International Trade Law and Policy, 13(3), 215-221.
  • Abdon Arneyln, GemmaB.Lee Minsoo, Estrada., & Donghyun, Park. (2014). Fiscal Policy and Growth in Developing Asia. Retrieved 2 8, 2018, from Asian Development Bank: https://www.google.com/search?q=Fiscal+Policy+and+Growth+in+Developing+Asia+Abdon%2C+A.%2C+Estrada%2C+G.B.%2C+Lee%2C+M.%2C+%26+Park%2C+D.&sxsrf=ALeKk004iwBxq5A1xK68RkRsHH9Kvg9rcA%3A1617879100686&ei=POBuYP-kKcT2sAfxvaAo&oq=Fiscal+Policy+and+Growth+in+Devel.
  • Akıncı, Adil., and Tüncer,Güner. (2018). EFFECTIVENESS OF FISCAL POLICY AND MONETARY POLICY IN TURKEY. DUMLUPINAR ÜNİVERSİTESİ SOSYAL BİLİMLER DERGESİ, 120-128.
  • li, Nasir., Qadri, Faisal Sultan., and Jawaid, Sayed Tahsin. (2011). Monetary-Fiscal-Trade Policy and Economic Growth in Pakistan: Time Series Empirical Investigation. International Journal of Economics and Financial Issues, 1(3), 133-138.
  • Ali, Wajahat., and Abdullah, Azrai. (2015). The impact of trade on the economic growth of Pakistan;1980-2010. Global Business and Management Research, 120-129.
  • Al-Masaeed, Abdullah Ali.,& Tsaregorodtsev, Evgeny. (2018). The Impact of Fiscal Policy on the Economic Growth of Jordan. International Journal of Economics and Finance; 018, 145-161.
  • Braşoveanu, Iulian., and Braşoveanu, Laura Obreja. (2008). The Correlation between fiscal policy and Economic Growth. Theoretical and Applied Economics, 19-26.
  • Coe, D. T. (1995). International R&D spillovers. European Economic Review, 859-887.
  • Edward, Sebastian. (1998). Openness, Productivity, and Growth: What Do We Really Know? Economics Journal, 393-398.
  • Esra, K. (2019, December 24). Conditions for VAR Analysis. (A. Q. Khaitr, Interviewer).
  • Freeman, Richard B. (1995). Are Your Wages set in Beijing? Journal of Economic Perspectives, 15-32.
  • Gerson, Philips. (1998). The impact of fiscal variables on Output Growth. IMF working paper.
  • Grey, Charly. (2007). Fiscal Policy and Economic Growth in Europe and Central Asia: An Overview. In T. I. Development, Fiscal Policy and Economic Growth. Washington, DC20433.
  • Huchet, Marilyne., Chantale Le, Mouel Le, Mouel., and Mariana Vijil. (Aug 2011). The relationship between Trade openness and economic erowth; Some New insights to the openness measurement issue. In XIIIème Congrès de l'Association Européenne des Economistes Agricoles (EAAE). Zurich (CH), Switzerland.
  • Karras, G. (2011). Trade openness and economic growth: can we estimate the precise effect. Applied Econometrics and International Development, 3(1), 223-231.
  • Keho, Yaya. (31 March 2017). The impact of trade openness on economic growth: The case of Cote d’Ivoire. GENERAL & APPLIED ECONOMICS, 1-14.
  • Lonela, Popa., and Diana, Codreanu. (2010, February 15). Fiscal Policy and its role in ensuring economic stability. Retrieved December 16, 2019, from https://mpra.ub.uni-muenchen.de/20820/1/FISCAL_POLICY_AND_ITS_ROLE_IN_ENSURING_ECONOMIC_STABILITY.pdf.
  • Lut, M. a. (2015). The impact of monetary policy on the Economic Growth of Cambodia. Journal of Management for Global Sustainable Development, 40-63.
There are 19 citations in total.

Details

Primary Language English
Journal Section Research Articles
Authors

Abdul Khatir 0000-0002-3882-8204

Burcu Güvenek 0000-0002-7159-2555

Zeynep Karaçor 0000-0003-2050-644X

Publication Date June 25, 2021
Published in Issue Year 2021 Volume: 3 Issue: 1

Cite

APA Khatir, A., Güvenek, B., & Karaçor, Z. (2021). The Impact of Fiscal Policy, Monetary Policy and Trade Openness on the Economic Growth; Case of Selected SAARC Countries. Niğde Ömer Halisdemir Üniversitesi Sosyal Bilimler Enstitüsü Dergisi, 3(1), 132-145.
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