The Impact of Monetary Policy and International Trade on Economic Growth and Inflation in ASEAN-4 Countries

Rini Dwi Astuti, Didit Welly Udjianto

Abstract


Economic growth and price stability are the main goals of macroeconomics, among other goals. The central bank can influence the economy to achieve the desired condition through its monetary policy. This study aims to analyze the effect of monetary policy and international trade on economic growth and inflation in four ASEAN countries (Indonesia, Malaysia, the Philippines, and Thailand), using panel data analysis and vector autoregression. The impulse response results show that monetary policy with an interest rate policy instrument hurts economic growth in the short run and is positive in the long run. In the short run, an expansionary monetary policy has effectively accelerated economic growth, vice versa. International trade positively affects economic growth in ASEAN-4 countries in the short run and vice versa in the long run. Panel data analysis shows a price puzzle regarding the effect of interest rates on inflation. Likewise, the effect of international trade on inflation shows a positive influence. An increase in exports encourages an increase in aggregate demand and prices. The implications of the results of this study are the need for policy coordination monetary policy, trade policy, and policy in the real sector so that the effectiveness of monetary policy increases.

How to Cite:
Astuti, R. D., & Udjianto, D. W. (2022). The Impact of Monetary Policy and International Trade on Economic Growth and Inflation in ASEAN-4 Countries. Signifikan: Jurnal Ilmu Ekonomi, 11(1), 175-190. https://doi.org/10.15408/sjie.v11i1.22142.


Keywords


economic growth; inflation; monetary policy; international trade

Full Text:

PDF

References


Adeoye, B., & Shobande, A. O. (2017). Monetary Policy Transmission Mechanism and Macroeconomic Aggregates in Nigeria. Caleb Journal of Social and Management Sciences, 3(2), 115-134.

Akinwale, Y. O., & Grobler, W. C. (2019). Education, Openness and Economic Growth in South Africa: Empirical Evidence from VECM Analysis. The Journal of Developing Areas, 53(1), 51-64.

Albu, L. L. (2006). Trends in the Interest Rate - Investment - GDP Growth Relationship. Romanian Journal of Economic Forecasting, 3, 5-13.

Amarasekara, C. (2008). The Impact of Monetary Policy on Economic Growth and Inflation in Sri Lanka. Central Bank of Sri Lanka Staff Studies, 38(2), 1-44.

Amrini, Y., Aimon H., & Syofyan, E. (2014). Analisis Pengaruh Kebijakan Moneter terhadap Inflasi dan Perekonomian di Indonesia. Jurnal Kajian Ekonomi, 2(4), 1-29.

Aron, J., & Muellbauer, J. (2007). Inflation dynamics and trade openness: with an application to South Africa. CSAE WPS/2007-11.

Arslan, Y., Contreras, J., Patel, N., & Shu, C. (2019). How Has Globalization Affected Emerging Market Economies?. BIS Papers, 100, 27-55.

Astuti, R. D. & Hastuti, S. R. B. (2020). Monetary Policy Transmission. JEQu, 10(1), 1-22.

Awad, I. L. (2011). The Monetary Transmission Mechanism in A Small Open Economy: The Case of Egypt. Journal of Economics and Business, 14(1), 73-96.

Aziz, M. D. Nusrate. (2010). Exchange Rates, International Trade, and Inflation: A Developing Economy Perspective. (Unpublished Thesis). University of Birmingham.

Douch, M. (2019). Monetary policy in a small open economy with imperfect pass-through. Atlantic Economic Journal, 47(4), 445-461.

Dua, P. & Goel, D. (2021). Determinants of inflation in India. The Journal of Developing Areas, 55(2), 205-221.

Elias, IA, et.al (2018). Impact of International Trade on the Economic Growth of Nigeria. European Journal of Business and Management, 10(18), 22-30.

Fitriani, E. (2019). Analysis of the Influence of International Trade on Indonesia's Economic Growth. Journal of Business Research and Management, 9(1), 18-26.

Gilchrist, S. & Zakrajsek, E. (2019). Trade Exposure and the Evolution of Inflation Dynamics. Finance and Economics Discussion Series 2019, 007. Board of Governors of the Federal Reserve System. Washington.

Gujarati, D. N., & Porter, D. C. (2009). Basic Econometrics. McGraw-Hill. Singapore.

Gujarati, D. N. (2012). Econometrics by Examples. Palgrave Macmillan. New York.

Han, X., & Wei, S. J. (2018). International transmissions of monetary shocks: Between a trilemma and a dilemma. Journal of International Economics, 110, 205–219.

Herlina, D. (2013). Identification of Monetary Policy Transmission Mechanisms for 2000-2011. Journal of Performance, 17(2), 158-173.

Ijirshar, V. U. (2019). Impact of Trade Openness on Economic Growth among ECOWAS Countries: 1975-2017. CBN Journal of Applied Statistics, 10(1), 75-96.

Kallianiotis, I.N. (2019). Monetary policy, the Actual Cost of Capital, Financial Markets, and Real Economic Growth. Journal of Applied Finance & Banking, 9(1), 75-118.

Keho, Y. (2017). The Impact of Trade Openness on Economic Growth: The Case of Cote d'Ivoire. Cogent Economics & Finance, 5, 1-14.

Krugman, P. (2011). International Economics: Theory and Policy. Prentice-Hall. New Jersey.

Leibovici, F. (2019). International Trade Openness and Monetary Policy: Evidence from Cross-Country Data. Federal Reserve Bank of St. Louis Review, Second Quarter 2019, 101(2), 93-113.

Mahendra, A. (2008). Analysis of Monetary Policy and Its Impact on Indonesia's Economic Growth. (Unpublished Thesis). The University of Northern Sumatra.

Makhmutova, D. I., & Mustafin A. N. (2017). Impact of International Trade on Economic Growth. International Journal of Scientific Study, 5(6), 140-144.

Mankiw, N. G. (2010). Macroeconomics, Seventh Edition. Worth Publishers. New York.

Maslan J, 2017, Efektifitas Mekanisme Transmisi Kebijakan Moneter di Indonesia Melalui Jalur Suku Bunga. Jurnal Ilmiah Kohesi, 1(1), 43-58.

Mishkin, F. S. (2016). The Economics of Money, Banking, and Financial Markets. Pearson Education. London.

Misra, P., & Topalova, P. (2007). How Does Globalization Affect Developing Countries? IMF Research, 8(3), 1-5.

Mogoe, S., & Mongale, I. P. (2014). The Impact of International Trade on Economic Growth in South Africa: An Econometric Analysis. Mediterranean Journal of Social Sciences, 5(14), 60-66.

Moyo, C., Khobai, H., & Kolisi, N. (2017). The Relationship between Trade Openness and Economic Growth: The Case of Ghana and Nigeria. MPRA Paper, 81317, 1-17.

Nouri, M., & Samimi, A. J. (2011). The Impact of Monetary Policy on Economic Growth in Iran. Middle-East Journal of Scientific Research, 9(6), 740-743.

Nuru, N. Y. (2020). The Dynamic Effects of Monetary Policy Innovations in Ethiopia. African Journal of Economic and Management Studies, 11(1), 169-180.

Obamuyi, T. M. (2009). An Investigation of the Relationship between Interest Rates and Economic Growth in Nigeria, 1970 - 2006. Journal of Economics and International Finance, 1(4), 93-98.

Okoro, A. S., Ujunwa, A., & Ukemenam, A. (2020). Does Regional Trade Promote Economic Growth? Evidence from the Economic Community of West African States (ECOWAS). Journal of Economics and Development, 22(1), 131-147.

Olamide, E. G., & Maredza, A. (2019b). A Dynamic Regression Panel Approach to the Determinants of Monetary Policy and Economic Growth: The SADC experience. African Journal of Economic and Management Studies, 10(3), 385-399.

Olamide, E. G., & Maredza, A. (2019a). Regional effects of monetary policy on the economic growth of ecowas: An s-var approach. The Journal of Developing Areas, 53(1), 205-223.

Onyeiwu, C. (2012). Monetary Policy and Economic Growth of Nigeria. Journal of Economics and Sustainable Development, 3(7), 62-73.

Pham, T. A. T., Nguyen, T. T., Nasir, M. A., & Duc Huynh, T. L. (2020). Exchange Rate Pass-through: A Comparative Analysis of Inflation Targeting & Non-targeting ASEAN-5 Countries. Quarterly Review of Economics and Finance, 1-10.

Raza, S. A., Sbia, R., & Al Rousan, S. (2018). Trade-growth Nexus and the Rolling Window Analysis in the United Arab Emirates. Journal of Asia Business Studies, 12(4), 469-488.

Rodriguez, F., & Rodrik, D. (2001). Trade Policy and Economic Growth: A Skeptic's Guide to the Cross-National Evidence. NBER Macroeconomics Annual 2000, 15, 261-338.

Solina, A. M., & Ocampo, L.V.G. (2020). Monetary policy indicators and economic growth in the Philippines 1986-2017. Review of Integrative Business and Economics Research, 9(1), 160-170.

Solomon, O. I., & Tukur, M. U. (2019). Trade Openness and Economic Growth in the Developing Countries: Evidence from Nigeria. International Journal of Academic Research in Economics and Management Sciences, 8(3), 30–42.

Solomon, R. (2007). The Role of International Trade as One of Indonesia's Economic Growth Sources. Module. Department of Commerce of the Republic of Indonesia and Postgraduate Program of Economic Sciences Indonesia University.

Sun, P., & Heshmati, A. (2010). International Trade and its Effects on Economic Growth in China. IZA Discussion Paper, No. 5151, 1-36.

Tadesse, T., & Melaku, T. (2019). Analysis of the Relative Impact of Monetary and Fiscal Policies on Economic Growth in Ethiopia, using ARDL Approach to Cointegration: which Policy is more Potent?. Copernican Journal of Finance & Accounting, 8(2), 87–115.

Tahir, M., & Hayat, A. (2020). Does International Trade Promote Economic Growth? Evidence from Brunei Darussalam. Journal of Chinese Economic and Foreign Trade Studies, 13(2), 71-85.

Temitope, L. A. L. (2020). Monetary Policy or Fiscal Policy, which One better Explains Inflation Dynamics in South Africa?. African Journal of Business and Economic Research, 15(1), 27–52.

Tulasi, G. et al. (2021). Understanding trend inflation in India: What do data speak?. IUP Journal of Applied Economics, 20(3), 57-71.

Tumala, M. M., Salisu, A. A., Atoi, N. V., & Yaaba, B. N. (2021). International monetary Policy Spillovers to Emerging Economies in Sub-Saharan Africa: A global VAR analysis. Scientific African, 14, 1-10.

Tung, L. T. (2021). Fiscal Policy, Monetary Policy, and Price Volatility: Evidence from an Emerging Economy. Organizations and Markets in Emerging Economies, 12(1), 51–70.

Younsi, M., & Nafla, A. (2019). Financial Stability, Monetary Policy, and Economic Growth: Panel Data evidence from Developed and Developing Countries. Journal of the Knowledge Economy, 10(1), 238-260.




DOI: https://doi.org/10.15408/sjie.v11i1.22142 Abstract - 0 PDF - 0

Refbacks

  • There are currently no refbacks.




View My Stats