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Comparing the Influences of Monetary Versus Fiscal Policy on the Economy: The Case of Malaysia

  • Siti Fatimah IsmailEmail author
  • Sek Siok Kun
Conference paper

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.

Keywords

Monetary and fiscal policies Inflation Gross domestic product Autoregressive distributed lag model 

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Copyright information

© Springer Nature Singapore Pte Ltd. 2019

Authors and Affiliations

  1. 1.School of Mathematical SciencesUSMGelugorMalaysia

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