Keywords
Money Supply
Inflation Rate
Gross Fixed Capital Formation
Autoregressive Distributed Lag Regression (ARDL)
How to Cite
Abstract
This study examines the effect of the broad money supply (M2) on the per capita economic growth in Palestine using time series data from 2000 to 2020. The study used autoregressive distributed lag model (ARDL), the cointegration approach and the error correction model to investigate the effect of money supply on gross domestic product (GDP) per capita. The model is determined by four macroeconomic variables, namely, gross domestic product (GDP) per capita, broad money supply (M2), gross fixed capital formation (GFCF), and inflation rate (INF). The results show that the money supply, the total capital formation, and the inflation rate have a positive impact on the economic growth in the short run. However, none of these variables affect the economic growth in the long term.
References
Abou El-Soud, M. S. (2014). Testing relationship between money supply and GDP in Bahrain. International Journal of Economic, Commerce and Management, 2(5), 1-15.
Adusei, M. (2013). Financial development and economic growth: Evidence from Ghana. The International Journal of Business and Finance Research, 7(5), 61-76.
Al-Fawwaz, T. M., & Al-Sawaie, K. M. (2012). Output, money, and prices: The case of Jordan. International Business Research 5 (12), 223-228. https://doi.org/10.5539/ibr.v5n12p223
Aslam, A. L. (2011). Impact of money supply on Sri Lankan economy: An econometric analysis. International Letters of Social and Humanistic Sciences, 67, 11-17. https://doi.org/10.18052/www.scipress.com/ILSHS.67.11
Assaf, B. (2018). The impact of the money supply on the Palestinian economy. [Master Thesis, An-Najah National University].
Authority, Palestine Monetary. (2021). Monetary stability report in Palestine. Ramallah, Palestine: Palestine Monetary Authority.
Babatunde, M. A., & Shuaibu, M. I. (2011). Money supply, inflation and economic growth in Nigeria. Asian-African Journal of Economics and Econometrics, 11(1), 147-163.
Bagehot, W. (1873). Lombard Street: a Description of the Money Market: By Walter Bagehot. Henry S. King & Company 65 Cornhill & 12 Paternoster Row, London.
Bouatrous, A., & Dahan, M. (2009). The impact of the change in monetary circulation on the GDP in the Algerian economy. Journal of Economic and Administrative Research, 5, 1-24.
Chaitipa, P., Chokethaworna, K., & Chaiboonsrib, C. (2015). Money supply influencing on economic growth-wide phenomena of AEC open region. International Conference on Applied Economics, 24, 108 – 115. https://doi.org/10.1016/S2212-5671(15)00626-7
Chude, N. P., & Chude, D. I. (2016). Impact of broad money supply on Nigerian economic growth. IIARD International Journal of Banking and Finance Research, 2(1):46-52.
Dingela, S., & Hlalefang, K. (2017). Dynamic impact of money supply on economic growth in South Africa: An ARDL approach. https://mpra.ub.uni-muenchen.de/82539/ MPRA Paper No. 82539, posted 10 Nov 2017 13:08 UTC.
Ehigiamusoe, U. K. (2013). The link between money market and economic growth in Nigeria: Vector Error Correction Model Approach. International Journal of Economics and Management Engineering, 7(12), 3076-3084.
Friedman, M., & Schwartz, A. J. (1963). A monetary history of the United States, 1867-1960. Princeton, NJ: Princeton University Press.
Gatawa, N M; Abdulgafar, A; Olarinde, M O. (2017). Impact of money supply and inflation on economic growth in Nigeria. IOSR Journal of Economics and Finance, 8(3), 26-37. https://doi.org/10.9790/5933-0803042637
Hameed, I., & Amen, U. (2011). Impact of monetary policy on Gross Domestic Product (GDP). Interdisciplinary Journal of Contemporary Research in Business, 3(1), 1348-1361.
Haque, M., & Hussain, M. E. (2017). Empirical analysis of the relationship between money supply and per capita GDP growth rate in Bangladesh. Journal of Advances in Economics and Finance, 2(1): 54-56. https://doi.org/10.22606/jaef.2017.21005
Ihsan, I., & Anjum, S. (2013). Impact of money supply (M2) on GDP of Pakistan. Global Journal of Management and Business Research Finance, 13(10), 1.
Keynes, J. M. (1936). The general theory of employment, interest, and money. London: Macmillan.
Maitra, B. (2011). Anticipated money, unanticipated money and output variations in Singapore. Journal of Quantitative Economics, 9 (1), 119.
Mohammad, S. D., Hussai, A., Wasti, S., & Lal, I. (2009). An empirical investigation between money supply, government expenditure, output & prices: The Pakistan evidence. European Journal of Economics, Finance and Administrative Sciences, 17(2), 60.
Narayan, P. K., & Smyth, R. (2008). Energy consumption and real GDP in G7 Countries: New evidence from panel cointegration with structural breaks. Energy Economics 30(5), 2331-2341.https://doi.org/10.1016/j.eneco.2007.10.006
Odhiambo, N. M. (2008). Financial depth, savings and economic growth in Kenya: A dynamic causal linkage. Economic Modelling, 25 (4), 704-713. https://doi.org/10.1016/j.econmod.2007.10.009
Palestinian Central Bureau of Statistics. (2021). Palestinian Macroeconomic Indicators. Ramallah, Palestine: Palestinian Central Bureau of Statistics.
Simwaka,, K. (2012). Money supply and inflation in Malawi: An econometric investigation. Journal of Economics and International Finance, 4(2), 36-48. https://doi.org/10.5897/JEIF11.138
World Bank. (2021). World Bank. Retrieved from World Bank: https://data.albankaldawli.org/indicator/NE.DAB.TOTL.ZS
Zapodeanu, D., & Cociuba, M. I. (2010). Linking money supply with the gross domestic product in Romania. Annales Universitatis Apulensis Series Oeconomica, 12(1), 501. https://doi.org/10.29302/oeconomica.2010.12.1.50
This work is licensed under a Creative Commons Attribution 4.0 International License.
Copyright (c) 2022 Array