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The study focuses on the BRICS economies for the duration 2001 up to 2015. The causality results revealed a unidirectional causality from foreign direct investment and broad money to total reserves, real GDP per capita and broad money to total reserves, broad money to total reserves and real interest rates as a percentage, foreign direct investment and commercial bank, debt stock, commercial bank, lending, foreign direct investments, real interest rates, and domestic credit provided by financial sector, domestic credit provided by financial sector, real GDP per capita.

The present reality of the Nigerian economy is the fact that inflation has remained unabated in spite of all exchange rate measures that have been adopted by the monetary authority. This calls for investigation into the extent to which exchange rate impact on inflation in Nigeria. The research paper examined the impact of exchange rate depreciation on inflation in Nigeria for the period 1981–2017, using Auto Regressive Distributed Lag (ARDL) Bounds Test Cointegration Procedure. The research shows that inflation rate in Nigeria is highly susceptible to lagged inflation rate, exchange rate, lagged exchange rate, lagged broad money, and lagged gross domestic product at 5% level of significance. A long run relationship was also found to exist between inflation rate, gross domestic product and general government expenditure, indicating that the model has a self-adjusting mechanism for correcting any deviation of the variables from equilibrium. Therefore, this study concludes that exchange rate is an important tool to manage inflation in the country; thus, this paper recommends that policies that have direct influence on inflation as well as exchange rate policies that would checkmate inflation movement in the country, should be used by the Central Bank of Nigeria. Also, monetary growth and import management policies should be put in place to encourage domestic production of export commodities, which are currently short-supplied. In addition, policy makers should not rely on this instrument totally to control inflation, but should use it as a complement to other macro-economic policies.

PurposeThe purpose of this study is to investigate the effect of financial intermediation functions of banks on economic growth in sub-Saharan Africa.Design/methodology/approachThe study employs data from 11 sub-Saharan African countries over the period 1970–2016. Using broad money supply, bank credit to the private sector and bank deposits as financial intermediation measures, the authors apply the random effects (RE) technique based on the recommendation of the Breusch–Pagan test.FindingsThe results show that except for bank deposits, broad money supply and bank credit to the private sector significantly influence economic growth. While broad money has a negative relationship with growth, bank credit to the private sector and bank deposits are positively correlated with economic growth.Originality/valueThe relationship between financial intermediation and economic growth remains unsettled, as results vary across countries. Besides, in developing countries' perspective, extant studies are largely focused on individual countries to investigate the financial intermediation-growth nexus. In this study, the authors take a different direction by employing a panel approach and thus adding to the few cross-country studies on the subject matter. Also, unlike other studies that have focused on a single indicator of financial intermediation, this study uses three indicators of financial intermediation which broadly reflect the intermediation functions of banks.

The persistent inflationary pressure despite monetary policy targets has become a phenomenon of interest among researchers. The study investigates the effects of monetary policy targets on inflation and its volatility in Nigeria using data spanning from 1985 to 2019. The ADF unit root test used confirmed that all the variables under study are integrated order zero in their level series. A Comparison of inflation volatility models (ARCH and GARCH models) with appropriate error distribution using AIC indicated that ARCH (1) is most appropriate. The results of least squares (LS) and maximum likelihood (ML) ARCH methods of estimation for the model specifications showed that measures of monetary policy targets such as narrow money supply (M1), broad money supply(M2), net domestic credit(NDC), net credit to government(NCG) and credit to private sector(CPS) have no significant effect on inflation and inflation volatility respectively except M2. However, M2 effect spurs inflation rather than curbing it. Hence, it becomes imperative for the government to make proactive policies targeted to reduce inflationary pressures so as to attain price stability in Nigeria’s economic space. Keywords: monetary policy targets, inflation, Volatility models.

This study aims to extend the conventional money demand function by including the economic policy uncertainty (EPU) index in the Indian money demand function. The rest of the determinants are income, interest rate, inflation rate, and exchange rate. Both symmetric and asymmetric effects of uncertainty are estimated covering the period 2003M1–2018M4. The linear ARDL bounds testing approach shows that uncertainty has a significant effect on narrow money in the short run. At the same time, the asymmetric nonlinear framework supports the short-run asymmetric effect of uncertainty on both narrow and broad money. More precisely, the policy uncertainty is a short-run phenomenon for the Indian money demand function. However, both linear and nonlinear models yield a stable demand for money in India regardless of narrow money or broad money. Hence, the monetary policy can be initiated to tune the Indian economy.

This study aims to analyze the relationship between defense expenditure and growth of the economy in Sri Lanka applying annual data during the period between 1990-2019 by engaging the ARDL bounds test and the Granger causality test. Economic growth is considered as a dependent variable whereas; defense expenditure, broad money supply, capital investment and exchange rate are considered as independent variables for this study. The findings revealed that defense spending has a significant and positive effect on economic growth in the long- run. Exchange rate, capital investment and broad money supply have a significant and positive influence in the short-run and long-run. Further, the output of the Granger causality confirms the one-way association between the growth of the economy and defense expenditure. The study suggests that government should concentrate more on human capital development rather than spending on defense.

The Nigerian exchange rate has gone through several reforms. Thus, this study seeks to also establish, the manner with which variations in the exchange rates influence industrial production.It focus essentially on the impact of a shock to the exchange rate on industrial production in Nigeria. The study employs the use of the SVAR model with the assumption of Cholesky decomposition as an identification scheme for four variables in the following order: exchange rate, industrial output, broad money supply, and price level.It is found that for the period under study, industrial output plays no role in explaining the fluctuations in the real exchange rate in the short run. Similarly, results show that shock to real exchange rate plays no role in explaining the fluctuations in industrial output in the short run. However by the end of a second-year period, industrial output takes 23% of the fluctuations in the real exchange rate and real exchange rate explains about 17% of the fluctuation in industrial output. As an extension, analyses show that shock to inflation and money supply have minimal influence on industrial output.It is recommended that a concentration on real factors such as savings rate, infrastructural facilities, political stability, and security can provide relatively more influence on industrial production in Nigeria.This study has contributed to knowledge through the analysis of data to identify the impact of a shock to the exchange rate on industrial production in Nigeria.

The paper scrutinized the correlation between financial development interaction with institutional quality and economic growth in Africa. The study adopted 30 different interactions. The study used the Augmented mean group estimation technique to estimate the model. Gross domestic savings/GDP and broad money/GDP positively influenced growth with the majority of interactions with institutional quality indicators. Credit to Private Sector/GDP interaction with Voice & Accountability; and Political Stability has a higher impact on growth than any interaction variable. However, government effectiveness, regulatory quality, and corruption control are weak in Africa; even if interacted with financial development indicators, it mostly reduces economic growth. This study recommends that governments in Africa strengthen financial development indicators; Bank Deposit/GDP, Gross Domestic Savings/GDP and Credit to private sector/GDP, and institutional quality indicator political stability & absence of violence since their interaction has proven to aid rapid economic growth.JEL Classification: E17, F62, F63How to Cite:Nketia, E. B., & Kong, Y. (2021). Decipheting African Financial Development Interaction with Institutional Quality and Economic Growth Nexus. Etikonomi: Jurnal Ekonomi, 20(1), 23 – 44. https://doi.org/10.15408/etk.v20i1.16177.

Liquidity trap economics seems to have fared particularly well on all counts of its predictions, in the aftermath of the 2008 global financial crisis. Therefore, in this paper we evaluate formally the effectiveness of unconventional monetary policy in a liquidity trap, based on data from Japan, the USA, and the eurozone over periods of liquidity trap conditions (1994–2018 for Japan and 2009–2018 for the USA and the eurozone). Under effective unconventional policies, changes in the base money-growth regime should be associated with similar regime changes in either inflation or investment expenditure growth and the estimation of a switching regimes model allows us to test whether significant joint regime shifts occur in the data. Also, a test of liquidity trap conditions is based on a discrepancy of regime shifts between growth rates of base money and broad money, since this implies a collapse of the money multiplier. Our findings show that drastic shifts in the growth rate of the monetary base do not produce similar behavior for the inflation rate, investment expenditure growth, and broad money growth, thus pointing to liquidity trap conditions and unconventional monetary policy ineffectiveness.

Monetary authorities have shown an increasing appetite for a steady demand for money function in Nigeria because of its vital role in conducting effective monetary policy. This paper presents a clear position of the money demand function deemed important for monetary policy implementation, especially with regard to a monetary targeting framework. The paper aimed to estimate a broad money demand function using quarterly data from Q11981 to Q4 2018. The autoregressive distributed lag/bounds test model was utilized for the cointegration test. The characteristics of the time series for the study were determined with the aid of the augmented Dickey–Fuller (ADF) and Phillips–Perron tests. The empirical results show the existence of cointegration among broad money demand, income, interest rate (I), real exchange rate (REXR) and inflation rate (INFL) within the considered period. Consequently, an error correction model (ECM) was set up to explain the short-run dynamics and we observed that the short-run adjustment for disequilibrium correction was insignificant. From the empirical findings, it was noticed that the velocity of money in the economy is predictable and, as such, a money supply target could be employed to regulate income and price levels.

This article investigates the post-1990 link between broad money growth and inflation in 16 full-fledged inflation-targeting regimes and four benchmark non-inflation-targeting regimes. This study employs the Christiano-Fitzgerald band-pass filter and continuous wavelet transform to analyze the co-movements across operational horizons and time. According to the band-pass filtering techniques, the link between money growth and inflation was weak and statistically nonsignificant over the investigated period: from 1990 onwards. The wavelet analysis demonstrated significant causality running from money growth to inflation, and strong significant co-movements between the two variables around the Great Recession at a typical business cycle frequency. This finding suggests that policymakers may need to respond to the short-run surges in money growth by reducing money growth rates. The empirical findings support the proposal that policymakers should return to a monetary framework that controls the money supply.

This study examined the impact of financial innovation on money demand in Nigeria, using quarterly time series for the period 2009-2019. The dependent variable was money demand, represented by broad money, while the independent variable was financial innovation represented by modern payment channels such as volume of Automated Teller Machines (ATMs) transactions, volume of Point of Sales (POS) transactions, volume of Internet banking transactions, and volume of Mobile banking transactions. The study employed the ordinary least squares (OLS) regression technique as the estimation method within the cointegration, granger causality, and error correction modeling. The result obtained showed that financial innovation has mixed impact on money demand in Nigeria during the period of analysis. For instance, financial innovation has positive impact on money demand through volume of ATM transactions in the current period, two periods lagged of volume of mobile banking transactions, current period and one period lagged of volume of internet banking transactions, and current period’s volume of Point of Sales (POS) transactions in Nigeria. On the other hand, financial innovation has negative impact on money demand through one period lagged of volume of point of sales in Nigeria. On the stability of the demand for money function, the result of the stability tests based on the CUSUM test and CUSUM of squares test showed that the demand for money function was stable during the evaluation period. The study recommended that monetary policy strategy of the central bank of Nigeria (CBN) should be fine-tuned to ensure it is well suited to deal with the challenges posed by financial innovation by way of proliferation of sophisticated payment channels.

One of the prerequisites for the effective development of the economy is the formation of a clear mechanism of monetary regulation, allowing the National Bank of the Republic of Belarus to influence business activity, control the activities of commercial banks, and achieve stabilization of money circulation. The subject of this research is a set of theoretical, methodological and practical issues aimed at modernizing monetary policy. The purpose of the research is to consider the theoretical foundations of monetary policy, to study its impact on the development of the national economy, to identify problems and propose directions for modernization. Methods of the research. In the course of the study, general scientific and formalized research methods were applied: analysis and synthesis, induction and deduction, description, systematization and classification, graphic, grouping, regression, trend model. Results of the work: the main problems of monetary policy were identified and formulated, specific ways of its modernization in the Republic of Belarus were proposed, a regression analysis was carried out, the results of which revealed a close relationship between the volume of broad money and the volume of deposits. The field of the results application. Scientific research organizations, government bodies, educational institutions.

Quantitative easing (QE) ineffectiveness in periods of liquidity trap conditions has been empirically verified for Japan, USA, and the Eurozone, on the basis of a switching regimes approach. In this work, we present further evidence that unconventional monetary policies are impotent when policy rates are close to their lower bound, using monthly data from Sweden, Switzerland, and the UK, whose central banks also pursued QE policies in the aftermath of the 2008 financial crisis. For all the economies considered, we obtain evidence of drastic regime shifts for base money growth which are successfully captured by a Markov switching regimes representation, but inflation, investment expenditure growth, and broad money growth do not appear to change significantly in different QE policy regimes, thus pointing to unconventional monetary policy impotence.

The purpose of this study is to investigate the stability of money demand function in emerging countries using the annual data over the period 1987 to 2018. The panel data was analyzed applying both static and dynamic panel models. With the static panel analysis, the random effect method is found to be an appropriate model to determine the factors that affect money demand in emerging countries. The findings of random effect method reveal real income affect money demand positively while exchange rate and real interest rate influence money demand negatively. The results of dynamic panel approach show that real income has positive impact on broad money demand while exchange rate, real interest rate and inflation negatively influence broad money demand in the long-run. The dynamic panel approach confirms that inflation has a significant impact on money demand in addition to the variables found to significantly influence money demand with the random effect method of static panel approach. This implies that dynamic panel model better estimates the determinants of money demand function as compared to static panel model. The stability analysis of each country confirms stable money demand function. The error correction model reveals any deviation from the equilibrium is corrected each year in the selected emerging countries. Therefore, the monetary policy makers can incorporate the outcome of this study as additional input for the implementation of effective monetary policy in the selected countries of emerging economies. Key words: Autoregressive Distributed Lag (ARDL) model, BRICS, dynamic panel model, money demand, pooled mean group, random effect method.

Purpose: The study’s objective is to determine the effect of financial deepening on the economic growth of the East Africa Community bloc. Specifically, it aims to establish the effect of the rate of broad money, credit to the private sector, and the rate of value of the traded stock on economic growth. Methodology: The study used descriptive research design and employed the fixed effect model in regression analysis. Broad money was used to proxy the rate of money supply, credit to the private sector was used to represent credit financing while the volume of the traded stock was used as a measure for financial market investment. Results: The findings revealed that all three indicators of financial deepening namely, broad money, credit to the private sector, and volume of traded stock had a positive and significant effect on economic growth in East Africa Community. The coefficient for broad money was 0.4410, the coefficient for credit to the private sector was 0.4022, while the coefficient for the volume of the traded stock was 0.1367. The model had an F statistic of 103.50, confirming its suitability. Implications: The study recommends that the East Africa Community governments should place more emphasis on the efficiency and of money supply, investment, and distribution by commercial banks. The study also recommends that the governments of East Africa Community countries should continue pursuing policies that promote access to credit such as ensuring that interest rates are low. Additionally, the capital market authorities of the East Africa Community countries should conduct sensitization campaigns to promote high participation in the stock market and other capital market products.

This paper attempts to quantify the coordination between monetary and fiscal policies in Rwanda from 2008 to 2018. The paper uses Granger causality test and vector autoregressive (VAR) framework to determine whether these policies are implemented independently and also looks at the extent of their coordination. The empirical results using unstructured VAR model suggest that monetary and fiscal policies interact and are coordinated in Rwanda. The impulse response functions demonstrate significant interaction between monetary and fiscal policy. For instance a positive shock on government expenditure induces an increase in broad money that in turn induces an increase in liquidity in the economy. Finally, the paper recommends that both policies should continue interacting in order to strengthen policy coordination. Therefore, ultimately achieve a stable and low inflation together with high growth.

Purpose This paper aims to examine the key factors determining bank deposit growth in Turkey for the period 2000Q1–2016Q4. Design/methodology/approach The study employs the autoregressive distributed lag approach to investigate the effect of bank-level and macroeconomic factors on deposit growth. Findings The results reveal that bank stability, banking sector efficiency, broad money supply, economic growth, and inflation are significant determinants of deposit growth in the long run. The findings further show that in the short run, only branch expansion and broad money supply are relevant for bank deposit mobilization. Originality/value This paper departs from the extant empirical studies that focus on the determinants of individual savings behaviour in Turkey. Considering the short- and long-run time dimensions, the authors distinctively examine how bank characteristics influence deposit growth, thus presenting a relatively pioneering attempt in this context.

Aim: Money velocity data for the United States show that there is a decline in all of the broad money aggregates in recent decades. This points to a sustained demand deficiency element. Can consumer heterogeneity be the cause of this declining trend? The aim of this paper is to find an answer for this question. Design / Research Methods: To achieve our aim we use Agent Based Modelling (ABM). In our model, the agents are heterogeneous consumers with different spending propensities. Conclusions / findings: We show that heterogeneous consumers with different spending propensities alone puts a downward pressure on money velocity. This pressure is coupled with a sustained worsening in the wealth distribution. We observe that as money accumulates in the hands of agents with the lowest propensity to spend, money velocity keeps declining. This also puts a downward pressure on nominal aggregate demand and hence a deflationary bias on the general price level. Originality / value of the article: This paper shows that heterogeneity of economic agents should not be ignored and that ABM is a very powerful tool to analyse heterogeneity. Implications of the research: The implication for policy makers is that the demand deficiency associated with the fall in money velocity will persist until the worsening of wealth dispersion comes to a halt.

This study examined the impact of financial development on the real sector in sub-Saharan Africa. The study used industrial value-added, productivity and agriculture value-added to proxy the real sector whilst domestic credit to the private sector, domestic credit by the bank and broad money are used as financial development indicators. Using panel data for 38 sub-Saharan countries over the period 1986 to 2015, this study found an inverse relationship between financial development and two out of the three indicators of the real sector used in this study. Based on countries’ classification by income, the study also found that financial development hurts the real sector in all the various income groups when the real sector is proxied by industrial value-added and productivity but produces contrary results when the real sector is proxied by agriculture value-added. Government expenditure and trade openness contributed to the development of the real sector. Corruption, as one of the institutional variables, harms the real sector. This study concluded by emphasising the need for the government to ensure balanced growth between financial development and the real sector.

Where classical economics integrates the quantity theory of money with the concept of Ricardian equivalence, the tendency of recent macroeconomic presentations is to focus either upon money and inflation or upon taxation and debt. That neglect of classical monetary–fiscal integration is surprising, given an initiative by the International Monetary Fund that set credit, money, and fiscal policy within a single structure. This article places those ‘credit counterparts of broad money’ in the context of the Great Depression and the recent global financial crisis. The upshot is a set of conclusions: that, to counter the prospect of deflation, quantitative easing is a weak policy response; that fiscal deficits are better; and that cuts in taxation are preferable to increased government spending.

This paper examined the effects of the financial liberalization strategy adopted on the African continent over 25 years ago in promoting new business entry using data from 22 sub‐Saharan African (SSA) countries in 2006–2017. Results from the dynamic generalized method of moments models show that: financial development via a policy of financial liberalization does not have a uniform effect on entrepreneurship; the interest rate gap significantly undermines the entrance of new firms; the ratio of broad money/gross domestic product (GDP) was positive and statistically significant while real interest rate had mixed findings; interactive effects of interest rate spread and real interest rate with regulatory quality was negative; the interaction of interest rate spread and real interest rate with natural resources confirms its destabilizing effect, although there was evidence suggesting that natural resources do not directly undermine entrepreneurship growth. Other results show real GDP and private credit have a significantly positive effect, and the cost of getting electricity significantly undermines entrepreneurship. The study calls for the need to deepen the financial sector though targeted reforms across SSA countries to reap its growth‐inducing effects on economic outcomes, while promoting institutional quality and efficient use of natural resources to achieve a non‐declining infusion of SMEs on the continent.

This study examined empirically the impact of monetary and fiscal policy management on the problem of inflation in Nigeria. Monthly data spanning from January 2010 to October 2016 on inflation rate, interest rate, exchange rate, narrow money, broad money, government capital expenditure and government recurrent expenditure were obtained from Central Bank of Nigeria (CBN) statistical bulletin and fitted into the regression model. Autoregressive Distributed Lag (ARDL) was employed after ascertaining the stationarity properties of the series through the Augmented Dickey-Fuller (ADF) test. The results showed that broad money supply (M2) and Capital Expenditure (CE) were significant and are positively related (short and long run) to inflation in Nigeria. Exchange rate was significant and positively related to inflation in the long run. The study also revealed that Nigerian inflationary situation is driven by monetary and fiscal policies in the long run. Narrow money has no significant impact on inflation problem both in the short and long run in Nigeria. The study concluded that monetary and fiscal policies have positive impact on inflation in Nigeria and recommended that monetary and fiscal policies should be harnessed, coordinated and sustained with the help of Central Bank of Nigeria in order to combat the problem of inflation in Nigeria. (JEL E62, E51, E31)

This study explores the linkages between velocity of money and economic growth in Sudan using conitegration and error correction methods in the context of the quantity theory of money QTM without inclusion of institutional factors. Cointegration analysis confirms existence of a long run equilibrium relationship between velocity of money and economic growth. The empirical analysis shows that velocity of money is significantly and positively affected by GDP and broad money, validating the QTM. Velocity of money is also found to be positively affected by trade openness, government deficit but negatively affected by inflation and investment. Granger causality test shows unidirectional relationships running from GDP, inflation and financial development to velocity of money. A bidirectional causality between velocity and trade openness is detected. These findings suggest that velocity of money is driven mostly by expansionary monetary policy and monetization of government deficit, which should be controlled.Keywords: Velocity of money; GDP; Inflation; Financial development; unemployment; trade opennessJEL Classifications: C32, E10, E40, E63DOI: https://doi.org/10.32479/ijefi.8944

Tujuan penelitian adalah untuk mengetahui dampak pembangunan sektor keuangan terhadap industrialisasi di Indonesia selama periode 1990 sampai 2019 dengan menggunakan data deret waktu. Data yang digunakan adalah rasio jumlah uang beredar terhadap PDB, rasio kredit domestik sektor swasta terhadap PDB dan interest spread rate. Hasil uji kausalitas granger pairwise dalam tahapan analisis VECM membuktikan bahwa terdapat hubungan satu arah antara rasio kredit domestik sektor swasta dengan rasio jumlah uang beredar dan rasio jumlah uang beredar dengan interest spread rate. Sedangkan variabel interest spread rate dan rasio kredit domestik sektor swasta memiliki hubungan dua arah. Hasil impulse response menunjukkan bahwa variabel rasio industry value added paling merespon guncangan variabel interest spread rate dibandingkan variabel-variabel lainnya. Hasil variance decomposition menunjukkan bahwa kontribusi yang diberikan variabel interest spread rate terhadap rasio industry value added relatif paling besar dibandingkan dengan kontribusi yang diberikan variabel rasio jumlah uang beredar dan rasio kredit domestic sektor swasta

This research examines the impact of monetary policy tools on macroeconomic variables through a nonlinear specification of threshold structural vector auto- regression (TVAR) using broad money and reverse repo rate as policy variables and output growth and inflation rate as macroeconomic variables. This research employs net domestic credit and interest rate spread as alternative threshold variables while segmenting the time 2001 m12-2018 m5 as easy and tight credit regimes in Pakistan. This research analyses the generalised impulse response functions for each threshold variable to specify the effects of monetary policy shocks. Current research finds that for one to two years’ time horizon; an increase in broad money has positive and long-time effect on output growth especially when interest rate spread is above its threshold value (i.e. easy credit regime). While a decrease in reverse repo rate brings a short-term positive effect on output growth whereas, an increase in reverse repo rate reduces the inflation for relatively longer time especially when economy is following an easy credit regime. This research identifies changes in broad money as an effective tool to enhance output growth and changes in reverse repo rate to control inflation rate in Pakistan.

This study explored the impacts of the different aspects of financial development on monetary transmission mechanism in Nigeria from the period of 1986-2017 using quarterly data. Variables such as broad money supply, debt stock, stock market capitalization, stock market value traded, total deposit money bank’s asset, total financial assets, private sector credit, inflation rate, monetary policy rate, exchange rate, all share index and output, were used to carry out this investigation. The study adopted Pesaran, Shin, and Smith (2001) ARDL framework to check the impacts of these individual financial development indicators and how they affect monetary transmission mechanism. The findings suggested that financial development indicators and their interactions with the policy rate influenced each channel of monetary policy with different degrees. Banking sector indicators (size and activity measures) had more influence on the channels of monetary policy transmission compared to capital market indicators, while financial market liberalization had the least influence on the channels of monetary policy transmission. However, the significance of the individual financial development indicators was found to be very weak on exchange rate channel, while the influence of the financial market indicators was strongest on the interest rate channel, thereby supporting previous studies that interest rate channel is the most dominant channel of monetary policy for Nigeria. Finally, the paper recommended that financial reforms must be geared towards strengthening the implementation of monetary policy and the channels through which monetary policies impact real economic activity.

Purpose The purpose of this paper is to investigate the effects of unanticipated monetary policy innovations on output and price for Ethiopia from 1991:Q1 to 2016:Q1. Design/methodology/approach Short run and long run identification schemes on structural vector autoregressive model are employed in this study. Findings The impulse response function results generated show that while a positive shock in interest rate causes a reduction in output and price puzzle, a positive shock to broad money supply has a positive and significant effect on output and price. A positive shock in real effective exchange rate has also an expansionary, though insignificant, effect on impact on both output and price. These results are especially true for the short run identification scheme. As to the results from the variance decomposition, the study shows that the highest variation in output and price is caused by broad money supply shock in the short run. Originality/value It adds to the scarce empirical literature on the effects of monetary policy innovations on the Ethiopian economy.

This paper examines the long run and short-run dynamics relationship between broad money, consumption expenditure, capital stock and interest rate in Nepal over the period of 1975-2017. This paper employs ARDL bound testing approach for co-integration between the broad money demand and its determinants. Result reveals the evidence of cointegration among the variables. The empirical results show that the demand for money is affected by the interest rate and final consumption expenditure both in the long run and short-run. However, the gross fixed capital formation has no impact on demand for money in the long-run and short-run as well. On contrast, interest rate is positively associated with Broad money demand, which is not consistent with theoretically. Positive association of money demand with interest rate shows that demand for money function is instability in Nepal. Thus, this study suggests that policy maker to correct price fluctuation through the control of various expenditure components, particularly, real final consumption expenditure might be an important strategy in the long run. However, the gross fixed capital formation has no impact on demand for money in the long-run.

The agricultural sector in Eswatini is viewed as an engine to foster economic growth, reduce poverty and eradicate inequality. The purpose of the study was to investigate the effects of monetary policy on the agriculture Gross Domestic Product (GDP) in Eswatini using annual data for the period starting from 1980 to 2016. Using the Vector Error Correction model (VEC), the empirical results indicated that in the long run, agriculture GDP, exchange rate, interest rate, inflation, broad money supply, and agriculture credit have a negative effect on agriculture GDP in Eswatini. In the short run the study indicated that the variation in agriculture GDP is largely significant caused by the lagged agricultural GDP, interest rate, exchange rate as well as inflation. Money supply and agriculture credit contribute 0.46% and 0.55%, respectively to the variation in agricultural GDP. The study recommends that programs aimed at availing affordable credit to farmers should be prioritized to cushion the agriculture sector against adverse monetary policy shocks in the short to medium term, specifically interest rates, to ensure continuous production.

The purpose of this study is to analyze the impact of financial deepening on economic growth in Indonesia. The time period studied for this research is from 1975 until2016. This study uses a quantitative research approach in the form of statistics and econometrics regression data. The data used is based on the annual time series data from 1975 until 2016. In this research, two models of testing are used, namely ARDL (Autoregressive Distributed Lag) and ECM (Error Correction Model). The results of this study indicate that financial deepening has a significant negative impact on economic growth in Indonesia. The Broad Money, Government Expenditure and Trade Openness variables influenced the variables of economic growth simultaneously in the period 1975-2016, but only the GDP and Trade openness variables had a significant influence on the dependent variable of GDP during the researched period. Therefore, Bank Indonesia (BI) needs to conduct further research on Broad Money trading (M2) so that the function of economic depth can encourage the growth of GDP Indonesia. In addition, there is a need for policies that will stimulate and facilitate foreign and domestic companies to sell their shares on BEI (Indonesian stock exchange) so that they can be traded by people whose impact will increase Indonesia's economic growth.

The aim of this paper is to investigate the effects of access to finance and its related activities on innovative growth and development in Sub-Saharan Africa. It was found that the growth effect of finance is sensitive to the choice of proxy. Contrary to studies by Levine (2005), Akinlo and Olufisayo (2009), and other, negative correlations, although surprising, were found between economic growth and all the following control variables: domestic credits to private sector; domestic credit and credits provided other than the private sector; central government credits; bank credit to private sector; and inflation, while broad money stock to GDP ratio as well as FDI are growth-inducing. That explains that a high growth in Sub-Saharan Africa will lead a decrease in the above variables, which seems unrealistic. As it is expected, especially that the credit to the private sector as ratios to GDP and total domestic credit should be conducive for economic growth and development through their innovative activities. The proxies created from major component analysis proved the sensitivity of the effect to the choice of proxy. Thus, these findings suggest that the good or bad effects of access to finance on growth largely depend on the indicator used to proxy for the role played by finance in the economy.

The interrelationships among the macroeconomic variables have been amply examined in the available literature; however, there exists a gap when it comes to the impact of technological shock coupled with other macroeconomic variables such as real exchange rate, Inflation, Broad Money, Research and Development, and Net Foreign Inflows on economic growth. The study examines how these macroeconomic variables are interlinked in the long run and how they behave in the short-run dynamic adjustment processes. A panel of ten highly competitive economies over 1996–2017 has been analyzed in a dynamic framework using the VECM. The results show that the six macroeconomic indicators maintain a long-run relation and GDP growth rate and inflation rate are caused by the other five variables in the panel. In the short run, the GDP growth rate is influenced by all the five remaining variables. The results indicate significant insights for identifying the possible causes of the appearances of ups and downs in the business cycle. Hence, it is recommended that the control and management of these macro indicators should be the priority agendas of the countries considered in the dynamic panel study.

This study examines financial deepening, financial intermediation and Nigerian economic growth. The main purpose is to examine the relationship between financial deepening and Nigerian economic growth while the specific objectives are to examine the impact of interest rate, capital market development, rational savings, credit to private sector and broad money supply on the growth of Nigerian. Secondary data of the variables were sourced from the publications of Central Bank of Nigeria (CBN) from 1981-2017. Nigerian Real Gross Domestic Product (RGDP) was used as dependent variable while Broad money supply (M2), Credit to Private Sector (CPS), National Savings (NS), Capital Market Capitalization (CAMP) and Interest Rate (INTR) was used as independent variables. Multiple regressions with E-view statistical package were used as data analysis techniques. Cointegration test, Augmented Dickey Fuller Unit Root Test, Granger causality test was used to determine the relationship between the variable in the long-run and short-run. R2, F – statistics and β Coefficients were used to determine the extent to which the independent variable affects the dependent variable. It was found from the regression result that Broad Money Supply, credit to private sector have position effect on the growth of Nigerian Real Gross Domestic Product while National Savings, Capitalization and Interest Rate on Nigeria Real Gross Domestic Product. The co-integration test revealed presence of long-run relationship among the variables, the stationary test indicated stationarity of the variables at level. The Granger Causality Test found bi – variant relationship from the dependent to the independent and from the independent to the dependent variables. The regression summary found 99.0% explained variation, 560.5031, F – statistics and probability of 0.00000. From the above, the study concludes that financial deepening has significant relationships with Nigerian economic growth. We recommend that government and the financial sector operators should make policies that will further deepen the functions of the financial system to enhance Nigerian economic growth. DOI: 10.1313/aijbms.v1i1.39

This research paper assesses the impact of exchange rates on the economic growth of Cambodia's. The study used variables such as gross domestic product (GDP) indicating Cambodia's economic growth, as well as some explanatory variables such as exchange rate (EXR), broad money (M2), and openness to trade (TOP), rate of inflation (IFR) and foreign direct investment (FDI). The study used an ordinary least squares (OLS) regression model to estimate the effects of exchange rates on Cambodia's economic growth. The research data was downloaded from the World Bank database. According to estimates, the results show that the impact of exchange rate (EXR) and openness to trade (TOP) on GDP is 1%. Exchange rate is positively correlated with GDP, while trade openness is negatively correlated with GDP. During the period of study (1995-2017), other variables such as broad money (M2), inflation rate (IFR), and foreign direct investment (FDI) possess not significant effect on Cambodia's GDP.

This study was on the assessment of financial deepening on the growth of Nigerian -economy 1990¬-2016. The main objective of this study is to evaluate the effect of private sector credit, money supply and market capitalization on economic growth in Nigeria. The sources of data for this study are CBN statistical Bulletin and National Bureau of Statistics. The data obtained were analyzed using ordinary least square regression (OLS). The result of the analyses showed that the three independent variables of the study all have significant effect on Nigerian financial deepening. It was therefore recommended that policy makers should consider reducing impediments to liquidity in the stock market, easing restrictions on international capital and entry into the market to ensure that more companies are listed, policies aimed to reduce the high incidence of non performing credits to ensure that private sector credits are channeled to the real sector of the economy and monetary authorities should implement policies that increase the flow of investible funds and improves the capacity of banks to extend credit to the economy as this will make broad money supply and private sector, to significantly impact on economic growth in Nigeria.

Every economy is subject to cyclical fluctuations, so it is desirable for policy makers to explore measures that may be taken in advance to ameliorate them. This paper attempts to do so for Indian economy. Growth Cycles and Growth Rate Cycles have been identified with the help of the Bry-Boschan (BB) Procedure, using data for the Index of Industrial Production (IIP). The corresponding Composite Index of Leading Indicators (CILI) for the growth cycle reference series has been constructed using Euro area Leading Indicator Index (EURO_LI), Bombay Stock Exchange-30 price index (BSE_SENSEX), United States Leading Indicator Index (US_LI), Index of Industrial Production- Manufacturing (IIP_MANF), Spread calculated as the difference between Monthly Average of secondary market yield on Government Securities with residual maturity of 10 years and 15-91 days (SPREAD_10_15_91), and Non-oil Imports (NOIL_IMPORTS). And CILI for the growth rate cycle reference series is constructed with leading indicators like Aggregate Deposits of Scheduled Commercial Banks (ADSCB), Bank Credit of Scheduled Commercial Banks (BCSCB), Gold Price (GP_MUMBAI), Index of Industrial Production- Manufacturing (IIP_MANF), and Broad Money (M3). Both composite indices are constructed by employing Principal Component Analysis (PCA). The results indicate that the Indian economy has experienced six growth cycles and five growth rate cycles during the period 1997:06 to 2017:06. The average duration of leads for peak and trough in growth cycles is reported to be 6.4 months and 7.8 months respectively, while the same for growth rate cycles is five months for peaks and three months for troughs. The probability of witnessing a recession in growth and growth rate cycles with forecast horizons of three, six, nine and 12 months, is in the vicinity of 0.4.

This study empirically investigates the impact of monetary policy shock on the manufacturing output in Nigeria using time series data covering the period between 1981 and 2018. Co-integration test was used to establish the long run relationship among the variables and Structural Vector Auto-Regressive model was employed to test for the shocks. It was found that shock to broad money supply would bring about positive and significant impact on the manufacturing output while the impact of shock to interest rate was found to be negative and insignificant. This study however concludes that shock to broad money is the main monetary policy instrument which can bring about positive change to manufacturing output in Nigeria. This paper then suggests that government and policy makers should primarily focus on this variable in their implementation of unanticipated monetary policy.

This paper examines the relationship between inflation and population age structure for emerging market economies. We form an unbalanced panel of data for 21 countries for the period 1950-2017 and include a number of additional control variables – terms of trade, exchange rate regime, debt-to-GDP ratio, broad money supply growth rates, and PPP-adjusted GDP per capita index. After estimating a variety of model specifications and robustness checks we conclude that the elderly group (65+) in these sample of countries is deflationary, the young group (0-19) shows weak signs of being deflationary, and the working group (20-64) is found to be inflationary. The deflationary effect of the elderly has been found in some studies for OECD countries, but the findings regarding the young group being deflationary and the working group being inflationary are new. Therefore, the question about the general empirical relation between inflation and the population age structure remains unsettled, and it is probable that the relation between population age structure and other macroeconomic variables is different for emerging market economies and for advanced countries.

Purpose The purpose of this paper is to examine whether a long-run stable money multiplier exists in Kazakhstan. It also investigates whether different episodes of currency shocks, including the financial crisis and recession of 2008–2010, have affected the working of the money multiplier in Kazakhstan. Design/methodology/approach The long-run multiplier is tested employing three cointegration tests: Engle–Granger (1987), Phillips–Ouliaris (1990) and Johansen and Juselius (1990). Findings The results of cointegration and coefficient restrictions tests are consistent with the money multiplier when broad money (M2 and M3) is used rather than when narrow money (M1) is used. The relationship between broad money and monetary base is structurally stable when examined on the basis of a dynamic (an error-correction) model. However, the M2 multiplier performs better than the M3 multiplier. Research limitations/implications This paper is restricted to testing a mechanistic version of the money multiplier and its stability using both narrow (M1) and broad money (M2 and M3) supplies. Thus, the paper focusses on the money view of the multiplier rather than the credit view of the multiplier. Practical implications One implication that emerges from the findings of this paper is that the National Bank of Kazakhstan can control M2 by controlling the monetary base, and hence the latter can serve as an indicator for monetary policy. Social implications The validity of the money multiplier implies that monetary policy can be conducted to control the money supply and the provision of bank credit to private sector to stabilize economic activity, thereby leading towards social stability in the economy as well. Originality/value In addition to offering a coherent survey of the literature on the standard money multiplier, this paper is a first attempt to find a stable money multiplier for Kazakhstan.

This study empirically examines the macro-economic factors of the stock market performance in Nepal. It considers the annual data of four macroeconomic variables; real GDP, inflation, interest rate and broad money supply from 1994 to 2016 and attempts to reveal the relative influence of these variables on stock prices represented by ‘NEPSE Index’ of the Nepalese capital market. Empirical results reveal that the performance of stock market is found to respond positively to real GDP, inflation and money supply, and negatively to interest rate. More importantly, cointegrating evidence cannot be found between macroeconomic variables and stock market index which suggests that stock price movements in Nepal are not explained by the macroeconomic variables. It supports random walk hypothesis in Nepalese stock market.Pravaha Vol. 24, No. 1, 2018, Page: 64-82

This study empirically examined the effects of monetary policy on commercial banks lending to the real sector from 1981 – 2014. The objective was to examine the effectiveness of monetary policy in channeling bank credit to the real sector. Annual time series data were sourced from Central Bank of Nigeria statistical bulletin. Two multiple regression models were specifically estimated with the aid of Software Package for Social Sciences. The study modeled commercial banks credit to agricultural and manufacturing sector as the function of interest rate, monetary policy rate, treasury bill rate, exchange rate, broad money supply and liquidity ratio. The result shows collinearity that corresponds with the Eigen value condition index, and variance constant are less than the required value. The Durbin Watson statistics shows the absence of multiple auto correlation and negative autocorrelation, while the variance inflation factors indicate the absence of auto-correlation. The regression results from model one found that interest rate, monetary policy rate have positive relationship with commercial banks lending to the agricultural sector while Treasury bill rate, exchange rate, broad money supply and liquidity ratio have negative effect on the dependent variable. Model two found that interest rate, Treasury bill rate, exchange rate, broad money supply and liquidity ratio have negative effect on commercial banks lending the manufacturing sector while monetary policy rate have positive relationship with the dependent variable. We recommend that monetary policy should be harmonize with bank lending objectives to enhance commercial banks lending to the real sector of the economy and that management of commercial banks should formulate policies of managing the negative effect of monetary policy variables on its lending.

Monetary policymakers and economists in Ghana have become very disconcerted about the policy implications of the widespread demand for and gradual shift to the use of foreign currency in the economy in recent years. The question of whether the mounting trend of dollarization provides evidence of currency substitution has remained an empirical quest. The purpose is to empirically establish whether the data provides evidence of currency substitution. The method employed models a long-run money demand function within the portfolio balance framework, which distinguishes between capital mobility and currency substitution and also accounts for the pre and post inflation targeting monetary policy regime. The estimation technique follows the cointegration and error correction framework using the Autoregressive Distributed Lag model for annual data from 1960–2013. The variables used are real money balances (defined in both narrow and broad terms) and real income, domestic interest rates, foreign interest rates, and exchange rates. The study reports that there is a stable long-run relationship between real money balances and the determinants. The results highlight that the income elasticity for narrow money is close to one but less than unity for broad money. The coefficient of the interest rate variable is negative for narrow money but positive for broad money pointing out differences in the definition of the two categories of money. Also, whereas the coefficient for returns on foreign bonds is negative for both narrow and broad monetary aggregates, the exchange rate variable remains positive throughout. The findings reveal that, although there is no empirical evidence to support currency substitution, exchange rates and foreign interest rates are significant factors in the domestic money demand dynamics. The validity of foreign interest rate and/or the expected depreciation of the domestic currency in the long-run money demand equation capture the existence of capital mobility. The implication is that domestic agents use foreign currencies together with the domestic currency, although the domestic currency remains the legal tender for domestic transactions. The results underscore the importance of developments in foreign interest rates and exchange rates for fiscal, monetary, and exchange rate policies in Ghana. The policy implications of these findings have been deliberated to provide a guide for policy choices in the emerging economy.

Economic policies always play a crucial role to achieve the country's economic stability through the mutual integration of fiscal and monetary policies. This study is one of the initiatives to analyze the dynamism of economic policies to achieve Pakistan's economic growth while controlling public taxes, government expenditures, broad money supply, inflation, and unemployment during a period of 1980-2017. The study employed the ARDL –Bounds testing approach in order to obtain the short- and long-run elasticities under the cointegrated framework. The results show that in the short-run, tax rate largely supported the country’s economic growth, while this result is disappeared in the long-run, where high tax rate substantially decreases economic growth. The result concluded that contractionary fiscal policy is undesirable in the long-run due to large tax evasion, which negatively impacts on the country's economic growth. The results further reveal that money supply has a positive and significant impact on country's economic growth both in the short and long-run, which implies that expansionary monetary policy stimulates economic growth via the channel of domestic and foreign investment in a country. The study also suggests that state should focus on fiscal measures while monetary measures can be effective in long-term.

This study examines the impact of microfinance institutions on economic growth of Nepal. Gross domestic product and per capita income are the dependent variables. The independent variables are total number of staffs, total number of members, microenterprises credit, total assets, total loan, total deposit, inflation and broad money supply. The study is based on secondary sources of data. The data have been collected for the period of 2012/13 to 2016/17 from 24 microfinance institutions leading to a total of 120 observations. The data are collected from Bank Supervision Report, Quarterly Economic Bulletin published by Nepal Rastra Bank and Economic Survey 2016/17 published by Ministry of Finance. The multiple regression models are estimated to test the significance and impact of microfinance institutions on economic growth of Nepal. The study shows that the total number of staffs, total number of members, ratio of microenterprises loan, total assets, total loan, total deposit and broad money supply growth are positively related to economic growth. It indicates that larger the number of staffs and members of micro-finance institutions, higher would be the economic growth. The results also show that increase in total assets and total loan leads to increase in economic growth. Likewise, the study reveals that higher the amount of total deposits, higher would be the economic growth. Similarly, the study shows that higher the money supply, higher would be the economic growth. However, result shows that there is a negative relationship between inflation and economic growth in Nepal. This indicates that higher the inflation, lower would be the economic growth.

This paper examines the cointegrating and causal relationships between insurance market development (IMD) and economic growth based on panel-data estimation techniques. It also investigates the dynamic interrelationships amongst a number of important macroeconomic variables on IMD-growth nexus. The sample consists of 26 countries observed over the period 1980-2013. We use six different indicators of IMD, covered under both insurance density and insurance penetration, to validate the robustness of our results. Our findings affirm a long-run equilibrium relationship between insurance market development, economic growth, and six other macroeconomic variables selected, namely broad money supply (relative to national income), real interest rates, inflation rates, urban population growth, youth dependency ratios, and government consumption expenditure (relative to national income). We use a panel vector auto-regression model to examine the nature of Granger causality among the variables. Most significantly, we find that IMD and some macroeconomic variables Granger-cause economic growth in the long run, irrespective of which measure of IMD we use.

In this study, the impact of money supply, interest rate and inflation on Dhaka Stock Exchange (DSE) of Bangladesh is explored. These macroeconomic variables are said to have strong impact on capital market. The purpose of this study is to find out if it is true for Dhaka Stock Exchange. For this purpose, data were collected for a period of twelve years from January 2001 to December 2012, on 144 variables. Broad money supply (M2) has been taken as a measure of money supply, 91-days T-bill has been taken as a measure of short-term interest rate and CPI general inflation rate (Base: 1995=100) has been taken as a measure of inflation rate. Apart from that many rules and regulations were reviewed. As to the relationship of the market indices, month-end DGEN Index and its percentage change were used in this paper. A unit root test has been done to see the stationarity of the variables because stationary data are needed for the analysis. A pairwise correlation matrix shows that there was no multicolinearity problem. A simple OLS regression indicates a relationship with money growth, interest rate. But Granger causality test shows that there is only a slight relationship with short term interest rate, nothing else. Overall though a short-run relationship is found between interest rate and market index; the relationship is not very strong. It is proposed that a study estimating long run impact of the explanatory variables should be taken up to know the full effect.Journal of Business and Technology (Dhaka) Vol.11(1-2) 2016; 41-54

The main objective of this study is to examine the impact of the macroeconomic indicators such as interest rate, real GDP, money supply and inflation on Nepal Stock Exchange (NEPSE) Index. This study is an empirical research based on secondary data and used the time series data for the total period of 24 years from fiscal year 1994 to 2018. The results of correlation analysis showed that broad money supply, real GDP and CPI have a statistically significant linear relationship with NEPSE index. However, T-bill rate and NEPSE index have a statistically insignificant linear relationship. Furthermore, the results of regression analysis showed that money supply is significant in predicting NEPSE index of the investors. Interest rate, real GDP and CPI are found to be insignificant in predicting NEPSE index. Similarly, relationship between stock market performance and macroeconomic variables is of pertinent importance to policy makers, regulators, academicians, researchers and investment community.

This study examined financial inter-mediation indicators on the economic growth, The Nigerian perspective from 1990 – 2018. The data for this work were sourced from CBN statistical bulletin. This study considered credit to private sector, broad money supply, interest rate and lending rate as the independent variables while Real Gross Domestic Product (RDGP) as the dependent variable. Vector error correction model were employed for this study and Eview 10 was used for the analysis. The results of the analysis show that there is a significant relationship between financial inter-mediation indicators and economic growth. Based on the result the following recommendations were made, federal government together with monetary authorities should enforce a policy that will mandate financial institutions to lower their lending and interest rates to encourage the most productive sectors of the economy to do better. Secondly, the floating of money supply into the economy should be strictly monitored to avoid inflation which will endanger economic growth. Finally, accessible credit facilities should be granted to the viable and high sensitive sectors that drive economic growth.