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Interest Rates and Economic Growth: Evidence from Southeast Asia Countries

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  • Tan Huu Nguyen

    (Faculty of Corporate Finance, Academy of Finance, Hanoi 100000, Vietnam)

Abstract

This study examines the dynamic interplay between interest rates, inflation, and GDP growth in Southeast Asian economies from 2000 to 2023, employing the Panel ARDL framework with the Pooled Mean Group (PMG) model. The findings confirm a robust long-term relationship among the Deposit Interest Rate (DIR), Lending Interest Rate (LIR), Consumer Price Index (CPI), and GDP growth. Higher deposit rates consistently promote economic expansion by encouraging savings and investment, while lending rates support long-term growth but limit short-term activity due to higher borrowing costs. Inflation adversely affects long-term growth by reducing purchasing power but boosts short-term demand. Historical GDP trends highlight the region’s susceptibility to global shocks, such as the 2008–2010 financial crisis and the 2020 COVID-19 pandemic, with forecasts indicating a gradual recovery from 2021 to 2025. The study emphasizes the importance of balanced monetary policies to enhance growth and stability in Southeast Asia, providing practical insights for policymakers addressing global and regional economic challenges.

Suggested Citation

  • Tan Huu Nguyen, 2025. "Interest Rates and Economic Growth: Evidence from Southeast Asia Countries," Economies, MDPI, vol. 13(8), pages 1-13, August.
    • Handle: RePEc:gam:jecomi:v:13:y:2025:i:8:p:244-:d:1728960
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