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

Abdul Khatir , Burcu Güvenek , Zeynep Karaçor

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.

Keywords

Government Expenditures, Broad Money Growth, Trade Openness, Growth, SAARC

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