1. Home
  2. Volume 7 - Number 1
  3. Role of monetary policy in economic growth and development: from theory to empirical evidence
New submission
Issues
Journal Information
Aims and ScopeEditorial BoardEditorial Advisory BoardJournal Policies
Resources
For Readers
For Authors
For Editors
For Reviewers
Publication EthicsCall for Special Issue
ISSN
ISSN 2615-9821
ISSN(Previous) 2588-1396

Volume 7 - Number 1 | March

Role of monetary policy in economic growth and development: from theory to empirical evidence

Muhammad Ayub Mehar

28/03/2023 94 0 0
Like Buy now 20.000 đ
Public private partnership Financial inclusion Domestic credit to private sector Neoclassical liberalism Ordoliberalism Panel least square

Abstract:

Purpose
This article examines the effects of credit to private sector on the business and trade activities. The effectiveness of rapid expansion in public and private borrowing through state's intervention after COVID-19 pandemic has been assessed in this study.

Design/methodology/approach
The model to determine the role of credit expansion is based on four equations estimated through panel least square technique on 18 years data of 186 countries.

Findings
It is concluded that credit to private sector and external debt improve the investment in infrastructure, which is a significant determinant of gross domestic product growth. Empirical evidences corroborate that higher number of firms using banks to finance their investment and the volume of broad money determine the magnitude of credit to private sector.

Originality/value
This study explores some new evidences and aspects of the credit financing which have not been discussed in this way before.

References:

  1. Baily, M.N. and Okun, A.M. (1965), The Battle against Unemployment and Inflation: Problems of the Modern Economy, 3rd revised edition, W.W. Norton & Co., New York, 1983.
  2. Case, A. and Deaton, A. (2020), Deaths of Despair and the Future of Capitalism, Princeton University Press, Princeton.
  3. Credit Suisse Research Institute (2019), Global Wealth Report, Credit Suisse AG, 2019, available at: www.credit-suisse.com.
  4. Durrani, A., Rosmin, M. and Volz, U. (2020), “The role of central banks in scaling up sustainable finance – what do monetary authorities in the Asia-Pacific region think?”, Journal of Sustainable Finance and Investment, Vol. 2 No. 10, pp. 92-112.
  5. Financial Times (2020), “Prospering in the pandemic”, Friday, 19th June, 2020.
  6. Foroohar, R. (2019), Don't Be Evil: How Big Tech Betrayed its Founding Principles – and All of Us, Currency, New York.
  7. Glichrist, S. and Leahy, J. (2002), “Monetary policy and assets prices”, Journal of Monetary Economics, Vol. 49 No. 1, pp. 75-97.
  8. Gormez, Y. (2019), “Central bank digital currency: a historical perspective”, in Amstad, M., Huang, B., Morgan, P.J. and Shirai, S. (Eds), Central Bank Digital Currency and Fintech in Asia, Asian Development Bank Institute, Tokyo, 2019.
  9. Gunderson, G. (2020), “How to prepare for the greatest wealth transfer in history”, Forbes, August 2020.
  10. Gupta, S. (2014), Fiscal Policy and Income Inequality, IMF, Fiscal Affairs Department, Washington, International Monetary Fund (IMF): Fiscal Affairs Department.
  11. Haddad, C. and Hornuf, L. (2019), “The emergence of the global fintech market: economic and technological determinants”, Small Business Economics, Vol. 53, pp. 81-105.
  12. International Monetary Fund (2020a), The Great Lockdown, International Monetary Fund, World Economic Outlook, International Monetary Fund, Washington, April 2020.
  13. International Monetary Fund (2020b), World Economic Outlook Update, International Monetary Fund, Washington, June 2020.
  14. International Monetary Fund (2020c), Fiscal Monitor: Policies to Support People during the COVID-19 Pandemic, Washington, DC, April.
  15. Kose, M.A., Ohnsorge, F., Nagle, P. and Sugawara, N. (2020), “Caught by a cresting debt wave: past debt crises can teach developing economies to cope with COVID-19 financing shocks”, Finance and Development, Vol. 57 No. 2, pp. 18-23.
  16. Krugman, P. (2020), “Notes on the coronavirus: the economic equivalent of a medically induced coma”, The New York Times, April 1, 2020.
  17. Marlene, A., Huang, B., Morgan, P.J. and Shirai, S. (Eds) (2019), Introduction and Overview in “Central Bank Digital Currency and Fintech in Asia”, Asian Development Bank Institute, Tokyo.
  18. Mehar, A. (2001), “Stock market consequences of macro economic fundamentals”, Pakistan Business Review, Vol. 3 No. 3, pp. 3-13, October 2001.
  19. Mehar, A. (2005), “Is debt a substitute of equity? Relevancy of financial policy in new economic scenarios”, Applied Financial Economics, Vol. 15, pp. 337-366.
  20. Mehar, A. (2011), “How monetary policy affect poverty: nexus and consequences”, South Asian Journal of Management Sciences, Vol. 5 No. 1, pp. 1-10.
  21. Mehar, A. (2018a), “Impact of monetary policy on growth and poverty: drastic consequences of government intervention”, Journal of Modern Economy, Vol. 1, p. 1, 2018.
  22. Mehar, A. (2018b), “Populism versus IMF conditionalities: demand management policies in present regime of globalization”, Management and Economics Research Journal, Vol. 4, pp. 1-18.
  23. Mehar, A. (2021), “Bridge financing during covid-19 pandemics: nexus of FDI, external borrowing and fiscal policy”, Transnational Corporation Review, Vol. 13 No. 1, pp. 1-16.
  24. Mehar, A. (2022), “Nexus of debt financing, investment and policy intervention: impacts of covid-19 pandemics on CAERC member countries”, in Tudler, R., Verbrke, A., Piscitello, L. and Puck, J. (Eds), International Business in Times of Crisis, Emerald Publishing, (First Edition), London, 2022.
  25. Nemoto, N. and Morgan, P.J. (2020), Environmental, Social, and Governance Investment: Opportunities and Risks for Asia, ADBI, Tokyo.
  26. Polak, J. (1957), “Monetary analysis of income formation and payments problems”, IMF Staff Papers, Vol. 6 No. 1, pp. 1-50.
  27. Rogoff, K. (2020), The COVID-19 Recession Could BeFar Worse than 2008, World Economic Forum, Geneva, April 2020.
  28. Shirai, S. (2020), Growing Central Bank Challenges in the World and Japan: Low Inflation, Monetary Policy, and Digital Currency, ADBI, Tokyo.
  29. Smith, E. (2020), “Report on economic recovery after pandemic”, CNBC, (20th August 2020).
  30. Stijn, C., Frost, J., Turner, G. and Zhu, F. (2018), “Fintech credit markets around the world: size, drivers and policy issues”, BIS Quarterly Review.
  31. The Economist (2020a), “Government finances: after the disease, the debt”, The Economist, 23rd April 2020.
  32. The Economist (2020b), “Starting over again: rethink in macroeconomics”, The Economist, 25th July 2020.
  33. The Economist (2020c), “The aliens among us: how viruses shape the world”, The Economist, 22nd A1ugust 2020.
  34. Tobin, J. (1969), “A general equilibrium approach to monetary theory”, Journal of Money, Credit and Banking, Vol. 1969 No. 1, pp. 15-29.
  35. University of Cambridge (2020), Brain Food: Economic Impact, Centre for Risk Studies at the University of Cambridge Judge Business School, Cambridge, 19 May 2020.
  36. World Bank (2020), Global Economic Prospects, The World Bank Group, Washington, June 2020.
  37. World Bank (2021), World Development Indicators, The World Bank Group, Washington, 2021.
  38. Xu, Z. and Xu, R. (2019), “Regulating fintech for sustainable development in the people's Republic of China”, in Amstad, M., Huang, B., Morgan, P.J. and Shirai, S. (Eds), Central Bank Digital Currency and Fintech in Asia, Asian Development Bank Institute, Tokyo, 2019.

Further reading

  1. Amstad, M., Huang, B., Morgan, P.J. and Shirai, S. (2019), “Introduction and overview”, in Amstad, M., Huang, B., Morgan, P.J. and Shirai, S. (Eds), Central Bank Digital Currency and Fintech in Asia, Asian Development Bank Institute, Tokyo, 2019.
  2. Claessens, S., Frost, J., Turner, G. and Zhu, F. (2018), “Fintech credit markets around the world: size, drivers and policy issues”, BIS Quarterly Review, pp. 29-49.

Related articles