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The Impact of Monetary Policy on Economic Development: Evidence from Lao PDR

Author

Listed:
  • srithilat, khaysy
  • Sun, Gang

Abstract

This paper examines the impact of monetary policy on the economic development by using annual time series data from 1989-2016. The unit root testing result suggests that all variables are stationary at first difference; therefore, the Johansen Cointegration and Error Correction Model has been employed to analyze the association between variables. The finding shows that money supply, interest rate, and inflation rate negatively effect on the real GDP per capita in the long run and only the real exchange rate has a positive sign. The error correction model result indicates the existence of short-run causality between money supply, real exchange rate and real GDP per capita.

Suggested Citation

  • srithilat, khaysy & Sun, Gang, 2017. "The Impact of Monetary Policy on Economic Development: Evidence from Lao PDR," MPRA Paper 79369, University Library of Munich, Germany, revised 27 Apr 2017.
  • Handle: RePEc:pra:mprapa:79369
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    File URL: https://mpra.ub.uni-muenchen.de/79369/1/MPRA_paper_79369.pdf
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    References listed on IDEAS

    as
    1. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    2. Christina D. Romer & David H. Romer, 2002. "A Rehabilitation of Monetary Policy in the 1950's," American Economic Review, American Economic Association, vol. 92(2), pages 121-127, May.
    3. Guillermo Felices & Vicente Tuesta, 2013. "Monetary policy in a dual currency environment," Applied Economics, Taylor & Francis Journals, vol. 45(34), pages 4739-4753, December.
    4. Ismail O. FASANYA & Adegbemi B.O ONAKOYA & Mariam A. AGBOLUAJE, 2013. "Does Monetary Policy Influence Economic Growth in Nigeria?," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 3(5), pages 635-646, May.
    5. Johansen, Soren, 2000. "Modelling of cointegration in the vector autoregressive model," Economic Modelling, Elsevier, vol. 17(3), pages 359-373, August.
    6. Fernald, John G. & Spiegel, Mark M. & Swanson, Eric T., 2014. "Monetary policy effectiveness in China: Evidence from a FAVAR model," Journal of International Money and Finance, Elsevier, vol. 49(PA), pages 83-103.
    7. Keshab Bhattarai, 2011. "Impact of exchange rate and money supply on growth, inflation and interest rates in the UK," International Journal of Monetary Economics and Finance, Inderscience Enterprises Ltd, vol. 4(4), pages 355-371.
    8. James Peery Cover, 1992. "Asymmetric Effects of Positive and Negative Money-Supply Shocks," The Quarterly Journal of Economics, Oxford University Press, vol. 107(4), pages 1261-1282.
    9. Tai-kuang Ho & Kuo-chun Yeh, 2010. "Measuring Monetary Policy in a Small Open Economy with Managed Exchange Rates: The Case of Taiwan," Southern Economic Journal, Southern Economic Association, vol. 76(3), pages 811-826, January.
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    Cited by:

    1. Mohamed Ibrahim Mugableh, 2019. "Does Monetary Policy Affect Economic Growth in Jordan? Evidence from Ordinary Least Square Models," International Business Research, Canadian Center of Science and Education, vol. 12(1), pages 27-34, January.
    2. Moses K. Tule & Oloruntoba S. Ogundele & Martins O. Apinran, 2018. "Efficacy of Monetary Policy Instruments on Economic Growth: Evidence from Nigeria," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 8(10), pages 1239-1256, October.

    More about this item

    Keywords

    monetary policy; economic development; laos; VECM; cointegration.;

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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