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Public finance and monetary policies as economic stabilizer: Unique or universal across countries?

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  • Arwiphawee Srithongrung

    (wichita State University)

Abstract

This study examines dynamic effects of fiscal and monetary policies on growth of two distinctive groups: industrialized with high-income and non-industrialized with medium-income economies. The literature is mixed in recommending fiscal and monetary policies to stabilize a national economy, especially for non- industrialized countries. Unlike high-income and industrialized countries, in the non-industrialized countries, capital markets are imperfect; and hence, setting interest rates to target inflation or mitigate recessions will be ineffective because the level of cash flows do not reflect true investment demands, leading to failed monetization. Data were derived from 36 countries over a 31-year period. Panel Vector Auto Regression (PVAR) was used to mitigate endogeneity which is an inherent problem of panel data. The results confirm the major hypothesis.

Suggested Citation

  • Arwiphawee Srithongrung, 2016. "Public finance and monetary policies as economic stabilizer: Unique or universal across countries?," Nóesis. Revista de Ciencias Sociales y Humanidades, Nóesis. Revista de Ciencias Sociales y Humanidades, vol. 25, pages 13-46, 49.
    • Handle: RePEc:cjz:noesis:149
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    More about this item

    Keywords

    Government spending; OECD; GDP growth; panel vector auto regression; medium-income country.;
    All these keywords.

    JEL classification:

    • Z10 - Other Special Topics - - Cultural Economics - - - General

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