Abstract
Low inflation and stable growth are the two main policy objectives targeted by many policymakers. However, both targets may not easily achieve. There are debates and issues discussed in comparing the performance between fiscal and monetary policies. In this study, empirical analyses were conducted to examine how influential both policies in determining the two economic variables of inflation and growth in Malaysia. The autoregressive distributed lags (ARDL) model was applied using the annual data of 1967–2016. Our results revealed that monetary policy (proxy by broad money) is influential in determining the inflation but not for the fiscal policy (proxy by government expenditure). In contrary, fiscal policy (proxy by government expenditure) is the main determinant to GDP growth. The study suggested for the co-implementation of monetary and fiscal policies in order to achieve low inflation and sustainable growth.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
References
ADB: ASIAN Development Outlook, (June). ASIA’S Potential Growth, Manila, Philippines (2016)
Attari, M.I.J., Javed, A.Y.: Inflation, economic growth and government Pakistan: 1980–2010. Paper presented at international conference on applied economics, Istanbul, 27–29 June 2013
Chaitip, P., Chokethaworn, K., Chaiboonsri, C., Khounkalax, M.: Money supply influencing on economic growth-wide phenomena of AEC open region. Paper presented at international conference on applied economics, Kazan, Russia, 2–4 July 2015
Denbel, F.S., Ayen, Y.W., Regasa, T.A.: The relationship between inflation, money supply and economic growth in Ethiopia: co integration and causality analysis. 6, 556–565 (2016)
Dupor, W.: How does government spending affect inflation. https://www.stlouisfed.org/on-the-economy/how-does-government-spending-affect-inflation (2016). Accessed 20 May 2017
Fischer, S., Sahay, R., Végh, C.A.: Modern hyper and high inflations. 3, 837–880 (2002)
Friedman, M.: Quantity theory of money. In: Eatwell, J., Milgate, M., Newman, P. (eds.) A Dictionary of Economics, pp. 3–20. Macmillan (1987)
Kesavarajah, M., Amirthaligam, S.: The nexus between money supply and inflation in Sri Lanka. In: Abstract of the Jaffna University International Research Conference, Sri Lanka, 20–21 July 2012
Khosravi, A., Karimi, M.S.: To Investigation the relationship between monetary, fiscal policy and economic growth in Iran: autoregressive distributed lag approach to cointegration. 7(3), 415–419 (2010)
Mehrara, M., Soufiani, M.B., Razaei, S.: The impact of government spending on inflation through the inflationary environment, STR approach. World Sci. News 137, 153–167 (2016)
Nguyen, T.D.: Impact of government spending on inflation in Asian emerging economies: evidence from India, Vietnam, and Indonesia. Dig. J. Mol. Med. (2014). https://doi.org/10.1142/s0217590816500338
Obi, K.O., Ajana, U.Z.: Dynamic impact of money supply on inflation: evidence from ECOWAS member states. 6, 10–17 (2015)
Pesaran, M.H., Shin, Y., Smith, R.P.: Bounds testing approaches to the analysis of level relationships. 289–326 (2001)
Tabar, F.J., Najafi, Z., Badooei, Y.S.: The relationship between money supply, prices, government expenditures and economic growth in Iran economy. 483–495 (2016)
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2019 Springer Nature Singapore Pte Ltd.
About this paper
Cite this paper
Ismail, S.F., Kun, S.S. (2019). Comparing the Influences of Monetary Versus Fiscal Policy on the Economy: The Case of Malaysia. In: Kor, LK., Ahmad, AR., Idrus, Z., Mansor, K. (eds) Proceedings of the Third International Conference on Computing, Mathematics and Statistics (iCMS2017). Springer, Singapore. https://doi.org/10.1007/978-981-13-7279-7_36
Download citation
DOI: https://doi.org/10.1007/978-981-13-7279-7_36
Published:
Publisher Name: Springer, Singapore
Print ISBN: 978-981-13-7278-0
Online ISBN: 978-981-13-7279-7
eBook Packages: Computer ScienceComputer Science (R0)