Monetary Policy, Trade Openness and Economic Growth in India Under Monetary-targeting and Multiple-indicator Approach Regimes

Hossain, Tafajul; Maitra, Biswajit

doi:10.1177/0976747919852859

Cited by 12 publications

(14 citation statements)

References 31 publications

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“…A few studies have done on the openness–growth relation in India. Among these, Hossain and Maitra (2019), for the period 1985–2016, have found a negative impact of trade openness on economic growth particularly in the long run, while in the short run such impact is positive. On the other hand, Sehrawat and Giri (2017) have found a two-way causal relationship between economic growth and trade openness for the period 1982–2014.…”

Section: Review Of Literaturementioning

confidence: 99%

Exploring Import-led Growth in India: Evidence from the Post-reform Period

Maitra

2020

South Asian Journal of Macroeconomics and Public Finance

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While the export-led growth (ELG) hypothesis attracted much attention historically, the import-led growth (ILG) dimension received little attention despite important linkages. The present article studies whether the ELG, ILG, growth-led export (GLE) and growth-led import (GLI) propositions hold in India for the post-reform period. Accordingly, the short-run and the long-run impacts of exports, imports, exchange rate and trade openness on income are assessed. The analysis finds prominent evidence of ILG hypothesis, both in the short run and in the long run suggesting that import is a significant bearing of economic growth, while the ELG hypothesis holds only in the short run. Besides, the exchange rate and trade openness have negative impacts on income. The study also finds indications of significant, stable export- and import-demand functions, where income and trade openness have caused exports and imports to rise. As income causes a rise in both export and import, the GLE and GLI hypotheses are also testified. The exchange rate depreciation and lagged imports also cause the export to a raise. As trade particularly import is an essential factor in income growth, the country should encourage more outer-orientation of the economy. An import liberalization policy could be useful for economic growth. JEL Classification: F43, F13, F14, O24, C32

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Section: Review Of Literaturementioning

confidence: 99%

Exploring Import-led Growth in India: Evidence from the Post-reform Period

Maitra

2020

South Asian Journal of Macroeconomics and Public Finance

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“…Our results indicate that it could take about one year (from the year of actual financing) to see the transmission of the impact of IPO financing on economic growth. Combined with the long-run results, our findings suggest that while IPO financing could have some immediate growth-enhancing effects, its overall effects are not significant over the 39 years Suborna Barua | Mahmuda Akter (Hossain & Maitra, 2020). Combining the long-run impacts of BR on EG, we can derive that the actual increases in bank rates and the herding behavior -in combination -raises the interest rates in the market in the long run, which in turn slows down economic growth through a reduced money supply and credit growth as explained earlier.…”

Section: Short-run Impact Of Ipo Financing and Bank Rate On Economic Growthmentioning

confidence: 63%

“…Contractionary measures, such as a higher bank rate could depress the economy by reducing the money supply and loanable funds in the market. Hossain & Maitra (2020) and Tan et al (2020) show a negative long-run impact of real interest rate increases on economic growth.…”

Section: Literature Reviewmentioning

confidence: 98%

The impacts of IPO financing and monetary policy on economic growth in Bangladesh: Evidence from a dynamic assessment

Barua¹,

Akter²

2021

JFMG

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Bangladesh is considered a fast-growing emerging economy and the new Asian tiger. The increasing need for capital funds in Bangladesh is largely met by banks, mainly due to the country’s underdeveloped nature of the stock market. Bank financing is assumed to be influenced by monetary policies, particularly, by bank rates adopted each year by the central bank of Bangladesh. On the other hand, while some studies stress the need for strengthening the debt and equity securities markets to support Bangladesh’s fast economic growth, debates swirl about whether or to what extent the stock market contributes to economic growth in the country. To address the understanding gap, in this paper, we examine the impact of capital financing through equity initial public offerings (IPO) and bank rate on the economic growth of Bangladesh. We use annual data from 1981 to 2019 and employ an autoregressive distributive lag (ARDL) framework to examine the long-run and short-run impacts of IPO financing and bank rate on GDP growth rate. Our findings suggest the existence of a long-run cointegrating relationship between IPO financing, bank rate, and GDP growth. We find that IPO financing does not have a significant long-run impact but shows only a one-period short-run positive impact on economic growth. On the other hand, bank rate shows a long-run negative and a one-period short-run positive impact on economic growth. Findings overall suggest that IPO financing does not significantly contribute to long-run economic growth while giving only a temporary boost. Further, increases in bank rate - as one would expect - depress economic growth in the long-run, while generating herd behavior immediately. Our findings stress the need for encouraging more quality IPO issuances, increasing the issuance size, and ensuring proper utilization of the funds by IPO issuers to make the capital market a key driver of economic growth.

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“…Ali and Abdullah (2015) noted that the long-run impact of trade openness on economic growth in Pakistan is negative, even though there is evidence of a positive impact only in the short run, due to weak institutions and poor management. The study of Hossain and Maitra (2020) has also revealed that the impacts of trade openness are unstable in the case of India, as trade openness proxies affect economic growth positively in the short-run but negatively in the long-run.…”

Section: Literature Reviewmentioning

confidence: 99%

Reviewing Trade Openness, Domestic Investment, and Economic Growth Nexus: Contemporary Policy Implications for the MENA region

Onifade

Khatir

et al. 2022

Finanz. polit. econ

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This study investigates the impact of trade openness on the economic performances of selected Middle East and North Africa (MENA) countries while incorporating elements of domestic investment into the empirical analysis in the wake of dynamic sentiments for trade liberalization among nations in recent times. The study covers an empirical analysis of a panel of observations from the selected countries within the framework of the Fully Modified Least Square (FMOLS), and the Dynamic Ordinary Least Square (DOLS) regression techniques. The empirical results affirm the existence of a long-run relationship among the variables. However, while domestic investment and the size of the labor force significantly impact economic growth in the positive direction among these countries, trade openness was found to be negatively impacting on growth for the period of the study. It is therefore recommended that cogent effort should be directed towards investments that are crucial for the improvement of labor productivity and production value chains in the domestic economy to dissuade or minimize the rate of export of raw primary commodities. Also, adequate steps should be taken to improve the overall business environment, remove trade impediments, and strengthen institutions among the countries in the region to harness the benefits of trade in our increasingly globalized world.

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Monetary Policy, Trade Openness and Economic Growth in India Under Monetary-targeting and Multiple-indicator Approach Regimes

Cited by 12 publications

References 31 publications

Exploring Import-led Growth in India: Evidence from the Post-reform Period

Exploring Import-led Growth in India: Evidence from the Post-reform Period

The impacts of IPO financing and monetary policy on economic growth in Bangladesh: Evidence from a dynamic assessment

Reviewing Trade Openness, Domestic Investment, and Economic Growth Nexus: Contemporary Policy Implications for the MENA region

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