Research Article
BibTex RIS Cite

Year 2023, Volume: 10 Issue: 3, 137 - 149, 30.09.2023

Sardar Naeem Hakimzai

https://doi.org/10.17261/Pressacademia.2023.1812

Abstract

References

  • Abeng, M. O. (2006). Financial Sector Reform Outcomes in Nigeria: A Quantitative Evaluation. CBN Bullion, 30(2), 53-69. https://dc.cbn.gov.ng/bullion/vol30/iss2/6/.
  • Alam, T., & Waheed, M. (2006). Sectoral effects of monetary policy: evidence from Pakistan. The Pakistan Development Review, 45(4II), 1103–1115. https://doi.org/10.30541/v45i4iipp.1103-1115.
  • Arintoko, A., & Kadarwati, N. (2022). Does monetary policy respond to macroeconomic shocks? Evidence from Indonesia. Jurnal Ekonomi & Amp, Studi Pembangunan, 23(2), 171–188. https://doi.org/10.18196/jesp.v23i2.14881
  • Arwatchanakarn, P. (2018). Monetary policy shocks and macroeconomic variables: evidence from Thailand. Studies in Computational Intelligence, 203–219. https://doi.org/10.1007/978-3-030-04263-9_16.
  • Ayodeji, A., & Oluwole, A. (2018). Impact of monetary policy on economic growth in Nigeria. OALib, 05(02), 1–12. https://doi.org/10.4236/oalib.1104320.
  • Busari,D., Omoke, P and Adesoye, B. (2002). Monetary policy and macroeconomic stabilization under Alternative exchange rate regime: evidence from Nigeria’. https://www.scirp.org/reference/ReferencesPapers.aspx?ReferenceID=2214849.
  • Cambazoğlu B, Karaalp HS., (2022). The effect of monetary policy shock on employment and output: The case of Turkey. International Journal of Emerging Sciences, 2(1), 23-29. https://ideas.repec.org/a/shc/jaresh/v3y2011i3p543-550.html.
  • Chuku CA. (2009). Measuring the effects of monetary policy innovations in Nigeria: A structural vector autoregressive (SVAR) approach. African Journal of Accounting, Economics, Finance and Banking Research, 5(5), 112-129. https://ssrn.com/abstract=1534227.
  • Csápaı, Á. (2020). Effect of exogenous monetary policy shocks on selected macroeconomic variables in Hungary: a SVAR approach. 12th International Conference of J. Selye University. Economics Section. Conference Proceedings. https://doi.org/10.36007/3754.2020.115.
  • Edoumiekumo, S.G., Karimo, T.M., & Amaegberi, M. (2013). Real sector responsiveness to monetary policy shocks in Nigeria. https://www.semanticscholar.org/paper/REAL-SECTOR-RESPONSIVENESS-TO-MONETARY-POLICY-IN-Edoumiekumo-Karimo/1924ff989349658fdf2ce675942065edf6abb07a.
  • Friedman, M., 1968. The role of monetary policy. American Economic Review 58 (1), 1–17. https://doi.org/10.4324/9780203443965-15.
  • Friedman M. and Schwartz A. (1963), A Monetary History of United States, Princeton University Press, Princeton, NJ., 1867-1960. https://doi.org/10.1515/9781400829330-020.
  • Gamber, E. N., & Hakes, D. R. (2005). Is monetary policy important for forecasting real growth and inflation? Journal of Policy Modeling, 27(2), 177–187. https://doi.org/10.1016/j.jpolmod.2004.12.008.
  • Ganley, J., & Salmon, C. (1998). The Industrial Impact of Monetary Policy Shocks: Some Stylised Facts. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.74661.
  • Gertler, M., & Gilchrist, S. (1994). Monetary policy, business cycles, and the behavior of small manufacturing firms. The Quarterly Journal of Economics, 109(2), 309–340. https://doi.org/10.2307/2118465.
  • Ghosh, S. (2009). Industry effects of monetary policy: evidence from India. Indian Economic Review, 44(1), 89-105. https://mpra.ub.uni-muenchen.de/17307/ .
  • Hjbrahim, M. (1998). A look at the empirical relationship between money, price, interest, and income in Malaysia. The Indian Economic Journal, 46(1), 39–53. https://doi.org/10.1177/0019466219980105.
  • Hui Boon, T., & Ahmad Zubaidi, B. (1999). Dynamic causal chain of money, output, interest rate and prices in Malaysia: Evidence-based on Vector Error Correction modelling analysis. International Economic Journal, 13(1), 103–120. https://doi.org/10.1080/10168739900000032.
  • Karim, S., Lee, M., & Gan, C. (2011). Price effects of monetary policy: the case of a small open economy of New Zealand. Economic Analysis and Policy, 41(3), 253–271. https://doi.org/10.1016/s0313-5926(11)50036-0.
  • Kim S. (1999). Do monetary policy shocks matter in the G-7 countries? Using common identifying assumptions about monetary policy across countries. Journal of International Economics, 48, 387-412. https://doi.org/10.1016/S0022-1996(98)00052-X.
  • Kuttner, K. N. (2001). Monetary policy surprises and interest rates: Evidence from the Fed funds futures market. Journal of Monetary Economics, 47(3), 523–544. https://doi.org/10.1016/s0304-3932(01)00055-1.
  • Lucas, R. E. (1972). Expectations and the neutrality of money. Journal of Economic Theory, 4(2), 103–124. https://doi.org/10.1016/0022-0531(72)90142-1.
  • Mankiw, N. Gregory, and David Romer. 1991. New Keynesian Economics. Cambridge: MIT Press. New Keynesian Economics: Coordination failures and real rigidities - Google Books.
  • Masih, A. M. M., & Masih, R. (1996). Empirical tests to discern the dynamic causal chain in macroeconomic activity: new evidence from Thailand and Malaysia based on a multivariate cointegration/vector error-correction modeling approach. Journal of Policy Modeling, 18(5), 531–560. https://doi.org/10.1016/0161-8938(95)00133-6.
  • Mumtaz, H., & Theodoridis, K. (2020). Dynamic effects of monetary policy shocks on macroeconomic volatility. Journal of Monetary Economics, 114, 262–282. https://doi.org/10.1016/j.jmoneco.2019.03.011.
  • Murgia, L. M. (2020). The effect of monetary policy shocks on macroeconomic variables: Evidence from the Eurozone. Economics Letters, 186, 108803. https://doi.org/10.1016/j.econlet.2019.108803.
  • Nuhu, K.M. (2015). An analysis of the impacts of monetary policy on Nigerian economy. Journal of Economics and Sustainable Development, 6(20), 129-133.
  • Oliner, S.D., & Rudebusch, G.D. (1995). Is there a bank lending channel for monetary policy. Econometric Reviews, 1-20. https://www.semanticscholar.org/paper/Is-there-a-bank-lending-channel-for-monetary-policy-Oliner-Rudebusch/ed72b27d992de6c1326f76521b94fbcb31714f0d.
  • Olivei, G., & Tenreyro, S. (2007). The timing of monetary policy shocks. The American Economic Review, 97(3), 636-663. https://www.jstor.org/stable/30035015.
  • Olorunfemi, S., Dotun, O.F. (2008). Stationarity analysis of the impact of monetary policy on the economic performance in Nigeria. Pakistan Journal of Social Sciences, 5, 562-566. URL: https://medwelljournals.com/abstract/?doi=pjssci.2008.562.566.
  • Omini, E., Ogbeba, E., & Okoi, O. (2017). Monetary policy shocks and ındustrial output in Nigeria. British Journal of Economics, Management & Amp, Trade, 16(2), 1–13. https://doi.org/10.9734/bjemt/2017/30459.
  • Peneva EV. (2013). Effects of monetary policy shocks across time and across sectors. Finance and Economics Discussion Series Divisions of Research & Statistics and Monetary Affairs Federal Reserve Board, Washington, D.C. https://www.federalreserve.gov/pubs/feds/2013/201370/index.html.
  • Peter Eze, G., & Waikumo Okotori, T. (2022). Exchange Rate Volatility and Monetary Policy Shocks. Macroeconomic Analysis for Economic Growth. https://doi.org/10.5772/intechopen.99606.
  • Uju E.A., Ugochukwu P.O. (2021). Effect of monetary policy on ındustrial growth in Nigeria. International Journal of Entrepreneurship and Business Innovation, 4(1), 47- 60. DOI: 10.52589/IJEBI-1Z4IYBYE.
  • Ramachandran, M. (2004). Do broad money, output, and prices stand for a stable relationship in India? Journal of Policy Modeling, 26(8-9), 983–1001. https://doi.org/10.1016/j.jpolmod.2004.08.008.
  • Romer, C. D., & Romer, D. H. (1994). Monetary policy matters. Journal of Monetary Economics, 34(1), 75–88.https://doi.org/10.1016/0304-3932(94)01150-8.
  • Saibu MO, Oladeji SI. (2007). Asymmetric policy shocks and real output fluctuations in Nigeria (1960-2004). The International Journal of Applied Economics and Finance, 1(2), 88–96. https://doi.org/10.3923/ijaef.2007.88.96.
  • Komura, C. (1982). Money, Income, and Causality: The Japanese Case. Southern Economic Journal, 49(1), 19. https://doi.org/10.2307/1058539
  • Tolulope, A. O. (2013). A bound test analysis of effects of monetary policy shocks on output and prices in Nigeria 2000-2010. Journal of Economics and Behavioral Studies, 5(3), 136–147. https://doi.org/10.22610/jebs.v5i3.388.
  • Walsh, C. E. (2003). Labour market search and monetary shocks. Dynamic Macroeconomic Analysis, 451–486. https://doi.org/10.1017/9781139165235.011.
  • Stock, J. H., & Watson, M. W. (1989). New ındexes of coincident and leading economic ındicators. NBER Macroeconomics Annual, 4, 351-394. https://doi.org/10.1086/654119.
  • Da Afghanistan Bank (DAB). (2019). DAB, http://dab.gov.af/en Retrieved April 5, 2023

THE EFFECT OF MONETARY POLICY SHOCKS ON INDUSTRIAL OUTPUT IN AFGHANISTAN

Year 2023, Volume: 10 Issue: 3, 137 - 149, 30.09.2023

Sardar Naeem Hakimzai

https://doi.org/10.17261/Pressacademia.2023.1812

Abstract

Purpose- This study examines the impact of monetary policy shocks on industrial output in Afghanistan. Quarterly secondary data were collected for the period from 2003 to 2021 from various official sources such as the Statistical Bulletin of the Central Bank of Afghanistan, the International Monetary Fund, and the World Bank.
Methodology- This study used a three-stage procedure. The first stage involved testing the stability of the variables to be included in the model. The second stage involves selecting the optimal lag length using various lag length criteria. Finally, the Vector Error Correction (VECM) model was used to determine if there were any short-run correlations or dynamics among the variables. The study also conducted some post-tests to confirm the validity and robustness of the regression model.
Findings- The results of the long-run vector error correction model show that there is a long-run causality running from monetary policy rate, broad money supply, inflation, exchange rate, and a commercial bank loan to the industrial sector. So, there was a speed of adjustment from the short-run to the long-run equilibrium. However, the Wald test confirmed that the short-run causality runs from the explanatory variables to the dependent variable. Commercial bank credit to the industrial sector was found to cause a change in industrial production in all six lag periods. The results were further supported by the Granger causality test. Shocks in commercial bank lending to the industrial sector were found to have no significant effect on industrial output. However, the performance of the industrial sector was the main cause of the flow of commercial banks' credit to the industrial sector.
Conclusion- The study recommends that monetary policy should proceed with extreme caution in managing the exchange rate. The study also recommends that the Central Bank of Afghanistan should encourage commercial banks to offer credit to the industrial sector at low-interest rates.

Keywords

Monetary policy shocks industrial output Vector Error Correction Model (VECM) Granger Causality Test Afghanistan

References

  • Abeng, M. O. (2006). Financial Sector Reform Outcomes in Nigeria: A Quantitative Evaluation. CBN Bullion, 30(2), 53-69. https://dc.cbn.gov.ng/bullion/vol30/iss2/6/.
  • Alam, T., & Waheed, M. (2006). Sectoral effects of monetary policy: evidence from Pakistan. The Pakistan Development Review, 45(4II), 1103–1115. https://doi.org/10.30541/v45i4iipp.1103-1115.
  • Arintoko, A., & Kadarwati, N. (2022). Does monetary policy respond to macroeconomic shocks? Evidence from Indonesia. Jurnal Ekonomi & Amp, Studi Pembangunan, 23(2), 171–188. https://doi.org/10.18196/jesp.v23i2.14881
  • Arwatchanakarn, P. (2018). Monetary policy shocks and macroeconomic variables: evidence from Thailand. Studies in Computational Intelligence, 203–219. https://doi.org/10.1007/978-3-030-04263-9_16.
  • Ayodeji, A., & Oluwole, A. (2018). Impact of monetary policy on economic growth in Nigeria. OALib, 05(02), 1–12. https://doi.org/10.4236/oalib.1104320.
  • Busari,D., Omoke, P and Adesoye, B. (2002). Monetary policy and macroeconomic stabilization under Alternative exchange rate regime: evidence from Nigeria’. https://www.scirp.org/reference/ReferencesPapers.aspx?ReferenceID=2214849.
  • Cambazoğlu B, Karaalp HS., (2022). The effect of monetary policy shock on employment and output: The case of Turkey. International Journal of Emerging Sciences, 2(1), 23-29. https://ideas.repec.org/a/shc/jaresh/v3y2011i3p543-550.html.
  • Chuku CA. (2009). Measuring the effects of monetary policy innovations in Nigeria: A structural vector autoregressive (SVAR) approach. African Journal of Accounting, Economics, Finance and Banking Research, 5(5), 112-129. https://ssrn.com/abstract=1534227.
  • Csápaı, Á. (2020). Effect of exogenous monetary policy shocks on selected macroeconomic variables in Hungary: a SVAR approach. 12th International Conference of J. Selye University. Economics Section. Conference Proceedings. https://doi.org/10.36007/3754.2020.115.
  • Edoumiekumo, S.G., Karimo, T.M., & Amaegberi, M. (2013). Real sector responsiveness to monetary policy shocks in Nigeria. https://www.semanticscholar.org/paper/REAL-SECTOR-RESPONSIVENESS-TO-MONETARY-POLICY-IN-Edoumiekumo-Karimo/1924ff989349658fdf2ce675942065edf6abb07a.
  • Friedman, M., 1968. The role of monetary policy. American Economic Review 58 (1), 1–17. https://doi.org/10.4324/9780203443965-15.
  • Friedman M. and Schwartz A. (1963), A Monetary History of United States, Princeton University Press, Princeton, NJ., 1867-1960. https://doi.org/10.1515/9781400829330-020.
  • Gamber, E. N., & Hakes, D. R. (2005). Is monetary policy important for forecasting real growth and inflation? Journal of Policy Modeling, 27(2), 177–187. https://doi.org/10.1016/j.jpolmod.2004.12.008.
  • Ganley, J., & Salmon, C. (1998). The Industrial Impact of Monetary Policy Shocks: Some Stylised Facts. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.74661.
  • Gertler, M., & Gilchrist, S. (1994). Monetary policy, business cycles, and the behavior of small manufacturing firms. The Quarterly Journal of Economics, 109(2), 309–340. https://doi.org/10.2307/2118465.
  • Ghosh, S. (2009). Industry effects of monetary policy: evidence from India. Indian Economic Review, 44(1), 89-105. https://mpra.ub.uni-muenchen.de/17307/ .
  • Hjbrahim, M. (1998). A look at the empirical relationship between money, price, interest, and income in Malaysia. The Indian Economic Journal, 46(1), 39–53. https://doi.org/10.1177/0019466219980105.
  • Hui Boon, T., & Ahmad Zubaidi, B. (1999). Dynamic causal chain of money, output, interest rate and prices in Malaysia: Evidence-based on Vector Error Correction modelling analysis. International Economic Journal, 13(1), 103–120. https://doi.org/10.1080/10168739900000032.
  • Karim, S., Lee, M., & Gan, C. (2011). Price effects of monetary policy: the case of a small open economy of New Zealand. Economic Analysis and Policy, 41(3), 253–271. https://doi.org/10.1016/s0313-5926(11)50036-0.
  • Kim S. (1999). Do monetary policy shocks matter in the G-7 countries? Using common identifying assumptions about monetary policy across countries. Journal of International Economics, 48, 387-412. https://doi.org/10.1016/S0022-1996(98)00052-X.
  • Kuttner, K. N. (2001). Monetary policy surprises and interest rates: Evidence from the Fed funds futures market. Journal of Monetary Economics, 47(3), 523–544. https://doi.org/10.1016/s0304-3932(01)00055-1.
  • Lucas, R. E. (1972). Expectations and the neutrality of money. Journal of Economic Theory, 4(2), 103–124. https://doi.org/10.1016/0022-0531(72)90142-1.
  • Mankiw, N. Gregory, and David Romer. 1991. New Keynesian Economics. Cambridge: MIT Press. New Keynesian Economics: Coordination failures and real rigidities - Google Books.
  • Masih, A. M. M., & Masih, R. (1996). Empirical tests to discern the dynamic causal chain in macroeconomic activity: new evidence from Thailand and Malaysia based on a multivariate cointegration/vector error-correction modeling approach. Journal of Policy Modeling, 18(5), 531–560. https://doi.org/10.1016/0161-8938(95)00133-6.
  • Mumtaz, H., & Theodoridis, K. (2020). Dynamic effects of monetary policy shocks on macroeconomic volatility. Journal of Monetary Economics, 114, 262–282. https://doi.org/10.1016/j.jmoneco.2019.03.011.
  • Murgia, L. M. (2020). The effect of monetary policy shocks on macroeconomic variables: Evidence from the Eurozone. Economics Letters, 186, 108803. https://doi.org/10.1016/j.econlet.2019.108803.
  • Nuhu, K.M. (2015). An analysis of the impacts of monetary policy on Nigerian economy. Journal of Economics and Sustainable Development, 6(20), 129-133.
  • Oliner, S.D., & Rudebusch, G.D. (1995). Is there a bank lending channel for monetary policy. Econometric Reviews, 1-20. https://www.semanticscholar.org/paper/Is-there-a-bank-lending-channel-for-monetary-policy-Oliner-Rudebusch/ed72b27d992de6c1326f76521b94fbcb31714f0d.
  • Olivei, G., & Tenreyro, S. (2007). The timing of monetary policy shocks. The American Economic Review, 97(3), 636-663. https://www.jstor.org/stable/30035015.
  • Olorunfemi, S., Dotun, O.F. (2008). Stationarity analysis of the impact of monetary policy on the economic performance in Nigeria. Pakistan Journal of Social Sciences, 5, 562-566. URL: https://medwelljournals.com/abstract/?doi=pjssci.2008.562.566.
  • Omini, E., Ogbeba, E., & Okoi, O. (2017). Monetary policy shocks and ındustrial output in Nigeria. British Journal of Economics, Management & Amp, Trade, 16(2), 1–13. https://doi.org/10.9734/bjemt/2017/30459.
  • Peneva EV. (2013). Effects of monetary policy shocks across time and across sectors. Finance and Economics Discussion Series Divisions of Research & Statistics and Monetary Affairs Federal Reserve Board, Washington, D.C. https://www.federalreserve.gov/pubs/feds/2013/201370/index.html.
  • Peter Eze, G., & Waikumo Okotori, T. (2022). Exchange Rate Volatility and Monetary Policy Shocks. Macroeconomic Analysis for Economic Growth. https://doi.org/10.5772/intechopen.99606.
  • Uju E.A., Ugochukwu P.O. (2021). Effect of monetary policy on ındustrial growth in Nigeria. International Journal of Entrepreneurship and Business Innovation, 4(1), 47- 60. DOI: 10.52589/IJEBI-1Z4IYBYE.
  • Ramachandran, M. (2004). Do broad money, output, and prices stand for a stable relationship in India? Journal of Policy Modeling, 26(8-9), 983–1001. https://doi.org/10.1016/j.jpolmod.2004.08.008.
  • Romer, C. D., & Romer, D. H. (1994). Monetary policy matters. Journal of Monetary Economics, 34(1), 75–88.https://doi.org/10.1016/0304-3932(94)01150-8.
  • Saibu MO, Oladeji SI. (2007). Asymmetric policy shocks and real output fluctuations in Nigeria (1960-2004). The International Journal of Applied Economics and Finance, 1(2), 88–96. https://doi.org/10.3923/ijaef.2007.88.96.
  • Komura, C. (1982). Money, Income, and Causality: The Japanese Case. Southern Economic Journal, 49(1), 19. https://doi.org/10.2307/1058539
  • Tolulope, A. O. (2013). A bound test analysis of effects of monetary policy shocks on output and prices in Nigeria 2000-2010. Journal of Economics and Behavioral Studies, 5(3), 136–147. https://doi.org/10.22610/jebs.v5i3.388.
  • Walsh, C. E. (2003). Labour market search and monetary shocks. Dynamic Macroeconomic Analysis, 451–486. https://doi.org/10.1017/9781139165235.011.
  • Stock, J. H., & Watson, M. W. (1989). New ındexes of coincident and leading economic ındicators. NBER Macroeconomics Annual, 4, 351-394. https://doi.org/10.1086/654119.
  • Da Afghanistan Bank (DAB). (2019). DAB, http://dab.gov.af/en Retrieved April 5, 2023
There are 42 citations in total.

Details

Primary Language English
Subjects Finance, Business Administration
Journal Section Articles
Authors

Sardar Naeem Hakimzai 0000-0001-7587-259X

Publication Date September 30, 2023
Published in Issue Year 2023 Volume: 10 Issue: 3

Cite

APA Hakimzai, S. N. (2023). THE EFFECT OF MONETARY POLICY SHOCKS ON INDUSTRIAL OUTPUT IN AFGHANISTAN. Journal of Economics Finance and Accounting, 10(3), 137-149. https://doi.org/10.17261/Pressacademia.2023.1812

Journal of Economics, Finance and Accounting (JEFA) is a scientific, academic, double blind peer-reviewed, quarterly and open-access online journal. The journal publishes four issues a year. The issuing months are March, June, September and December. The publication languages of the Journal are English and Turkish. JEFA aims to provide a research source for all practitioners, policy makers, professionals and researchers working in the area of economics, finance, accounting and auditing. The editor in chief of JEFA invites all manuscripts that cover theoretical and/or applied researches on topics related to the interest areas of the Journal. JEFA publishes academic research studies only. JEFA charges no submission or publication fee.

Ethics Policy - JEFA applies the standards of Committee on Publication Ethics (COPE). JEFA is committed to the academic community ensuring ethics and quality of manuscripts in publications. Plagiarism is strictly forbidden and the manuscripts found to be plagiarized will not be accepted or if published will be removed from the publication. Authors must certify that their manuscripts are their original work. Plagiarism, duplicate, data fabrication and redundant publications are forbidden. The manuscripts are subject to plagiarism check by iThenticate or similar. All manuscript submissions must provide a similarity report (up to 15% excluding quotes, bibliography, abstract and method).

Open Access - All research articles published in PressAcademia Journals are fully open access; immediately freely available to read, download and share. Articles are published under the terms of a Creative Commons license which permits use, distribution and reproduction in any medium, provided the original work is properly cited. Open access is a property of individual works, not necessarily journals or publishers. Community standards, rather than copyright law, will continue to provide the mechanism for enforcement of proper attribution and responsible use of the published work, as they do now.