A Memorandum Submitted to the Canadian Royal Commission on Banking and Finance

The purpose of this paper is to investigate the relative effect of monetary policy and fiscal policy on economic growth in Ethiopia. The paper employed annual time series data from a period of 2009 to 2019. The paper performed Augmented Dickey-Fuller test for unit root, Johansson test of co-integration and Ordinary Least Squares estimation technique to analyze the data. The findings revealed that monetary policy proxy by interest rate has significantly a negative effect on the Ethiopian economic output. Likewise, the study found that fiscal policy proxy by government expenditure has significantly and positively influenced the economic growth (GDP) in Ethiopia. Finally, the study exposed that fiscal policy is somewhat influential than monetary policy in altering economic growth of Ethiopia. The study suggested that both fiscal and monetary policies should be implemented simultaneously to ensure macroeconomic stability and sustainable economic growth in Ethiopia. It is also recommended that government annual budget and projects implementation should be monitored adequately to ensure price stability, full employment, and economic growth. Monetary policies implemented by the National Bank of Ethiopia should promote conducive investment atmosphere through appropriate stabilization of interest rates, and inflation rates to promote economic growth of the country. DOI: 10.7176/PPAR/10-11-01 Publication date: November 30 th 2020

In many economies the major role of government is the regulation and stabilization of the system in other to achieve macroeconomic objectives, which include but not limited to sustainable economic growth, full employment, and price stability. Monetary and fiscal policies have been considered as viable economic planning strategies for achieving the stated macroeconomic objectives. But the extent to which each is to be used to achieve the desired objectives is a matter of intense debate among policy makers and economists. This study is on monetary-fiscal policy coordination and economic growth sustainability in Nigeria. The objective is to examine the contributions of monetary and fiscal policies to economic growth in Nigeria and how their coordination has affected the economy towards growth recovery and sustainability. Unit root test, co integration test, Auto Regressive Distribution Lag (ARDL) model and trend analysis were some of the econometric techniques used for data estimation. The following variables were used as explanatory variables – Money Supply (MS), Monetary Policy Rate (MPR), Total Government Expenditure (TEXP) and Tax Revenue (TXREV), while the dependent variable is Real Gross Domestic Product (RGDP) proxy of economic growth. The data were sourced from Central Bank of Nigeria (CBN) statistical bulletin covering the period of 37 years. The result of the st stationarity test showed that all the independent variables were stationary at 1 difference while the dependent variable was stationary at level form. The Bound test proved that there was the existence of long run equilibrium relationship among the variables. The result from the short run analysis showed that TXREV was significant in one period lag and negatively related to RGDP. In the long run MPR and MS have significant impact on RGDP and were rightly signed. The combined effect of monetary and fiscal policies on the level of economic growth in Nigeria is found to be weak and unstable over the years of study, which indicates weak long-run relationship between the explanatory variables and the dependent variable. It is therefore necessary to establish an appropriate framework to intensify coordination between monetary and fiscal policies as tools for economic stabilization. However increased autonomy of the Central bank and the Debt management office may help realize the desired objective.

Abstract, Fiscal and monetary policies have an important role in sustainable economic growth in Indonesia. This research aims to evaluate the effectiveness of fiscal and monetary policies in achieving sustainable economic growth. The research method applied is descriptive analysis using secondary data obtained from various trusted sources. The research results show that fiscal policy, which includes budget regulation, taxes and subsidies, has made a positive contribution to economic growth. However, efforts are still needed to improve the efficiency of budget management and transparency in the use of public funds. Meanwhile, monetary policy, which includes setting interest rates and the money supply, also has a significant impact on economic growth. However, the need to balance price stability and economic growth remains a challenge. In conclusion, to achieve sustainable economic growth, close coordination between fiscal and monetary policies is needed. In addition, comprehensive structural reforms and increasing institutional capacity are very important to create a supportive environment to ensure sustainable economic growth in Indonesia.

This paper examined the nexus of macroeconomic policy (monetary and fiscal policies), investment and economic growth. The findings established that monetary and fiscal policies affect aggregate investment and economic growth in Nigeria. It also showed that the management of monetary and fiscal policies in Nigeria has not yet achieved macroeconomic stability objective. The implementation of the monetary policy, in particular, has not helped to stimulate savings and ensure it's efficient allocation for investment purposes, hence appropriate rate of investment and sustained economic growth has eluded the country. For a sustainable macroeconomic policy that will engender appropriate rate of investment and sustained economic growth, this paper therefore, recommends harmonious working relationship between monetary and fiscal authorities, effective coordination and harmonization of monetary and fiscal policies, monetary policies should focus on lowering interest rates and increasing availability of credits to productive sectors of the economy. Furthermore, the monetary authorities should strongly discourage exploitative tendencies and unethical practices of banks, banks should avoid sharp and unscrupulous practices and discipline themselves to play according to the rules of the game as well as effectively carry out their financial intermediation role.

This study investigated the impact of the people category of the Sustainable Development Goals (SDGs) on sustainable and conventional economic growth in Asia and the Pacific region, using a sample of 52 selected countries between 2000 and 2023. Employing two distinct models, model A1 for conventional economic growth and model A2 for sustainable economic growth, we explained the relationships between five SDG indicators: employed poverty rate, stunted children, expenditure on health, expenditure of education, and % of women MNAs on economic growth. This study employed a fixed-effect model and random-effect model to investigate the impact of the people category SDGs on traditional and sustainable economic growth. The comparative analysis of each SDG in both models revealed valuable insights. SDG 1, “employed poverty rate”, has a positive impact on economic growth in both models, while SDG 2, “percentage of stunted child”, did not significantly influence economic growth in either model. Moreover, SDG 3 and SDG 4, relating to “government’s health expenditure per capita” and “government’s Education education expenditure per capita”, respectively, exhibited a positive impact on traditional and sustainable economic growth. Conversely, SDG 5, “percentage of women members of national parliament”, displayed an insignificant impact on traditional and sustainable economic growth models. In conclusion, this study suggests that policymakers should prioritize targeted interventions to alleviate employed poverty, enhance healthcare, and boost education spending. Moreover, promoting women’s representation in national parliaments should be approached with context-specific strategies to maximize its impact on economic growth.

The EU ratification of the Paris Agreement initiated extensive political and legislative activities within the EU to reach agreed climate objectives. The declaration of the climate crisis, the publication of the European Green Deal, and the obligation to reduce greenhouse gas emissions by at least 55% by 2030 compared to 1990 levels created the foundations for establishing an ambitious climate legal framework at the EU level. At the center of that legal framework is the European Climate Law, which obliges the EU to achieve climate neutrality by 2050. Completing the set goals requires a strong climate transition, which includes, among other actions, a change to a low-carbon economy. At the EU level, the obligation to fulfill the goals of the Paris Agreement and the related goals of the European Climate Law is primarily on the institutions of executive and legislative power that have the democratic legitimacy to act actively to achieve climate neutrality. However, the international agreements concluded by the EU (including the Paris Agreement) are binding upon all EU institutions, i.e., the European Central Bank, as explicitly prescribed in the TFEU. The European Central Bank, simply put, represents the supranational central bank of the eurozone. With regard to its legal nature, the European Central Bank is often defined as an EU institution sui generis, which reflects its unique position given by the TFEU and the Statute of the ESCB and the ECB. Apart from the fact that the European Central Bank has a legal personality and regulatory powers and that its financial resources are separated from those of the EU, the ECB’s unique position derives from the fact that the TFEU strictly limits its legal mandate. The primary mandate of the European Central Bank is to maintain price stability within the eurozone. The secondary mandate of the European Central Bank is to support, without prejudice to its price stability objective, the general economic policies in the EU, with a view to contributing to the achievement of the objectives of the EU, including a high level of protection and improvement of the quality of the environment. Considering its strictly prescribed goals, addressing the climate objectives could contradict the European Central Bank’s legal mandate. Even though the European Central Bank has already decided to take into consideration climate- related objectives, there is still an ongoing debate in academic and central banks’ circles whether the European Central Bank could or must address climate objectives in its activities or, following the rule of law principle, is precluded in doing so. This paper aims to contribute to this debate by giving the legal perspective of the European Central Bank’s price stability mandate and its secondary mandate, as well as their relation to EU climate objectives.

Analysis of energy consumption structure on CO[formula omitted] emission and economic sustainable growth

PurposeThe global financial crisis demonstrated that monetary policy alone cannot ensure both price and financial stability. According to the Tinbergen (1952) rule, there was a gap in the policymakers’ toolkit for safeguarding financial stability, as the number of available policy instruments was insufficient relative to the number of policy objectives. That gap is now being closed through the creation of new macroprudential policy instruments. Both monetary policy and macroprudential policy have the capacity to influence both price and financial stability objectives. This paper develops a framework for determining how best to assign instruments to objectives.Design/methodology/approachUsing a simplified New-Keynesian model, the authors examine two sets of policy trade-offs, the first concerning the relative effectiveness of monetary and macroprudential policy instruments in achieving price and financial stability objectives and the second concerning trade-offs between macroprudential policy instruments themselves.FindingsThis model shows that regardless of whether the objective is to enhance financial system resilience or to moderate the financial cycle, macroprudential policies are more effective than monetary policy. Likewise, monetary policy is more effective than macroprudential policy in achieving price stability. According to the Mundell (1962) principle of effective market classification, this implies that macroprudential policy instruments should be paired with financial stability objectives, and monetary policy instruments should be paired with the price stability objective. The authors also find a trade-off between the two sets of macroprudential policy instruments, which indicates that failure to moderate the financial cycle would require greater financial system resilience.Originality/valueThe main contribution of the paper is to establish – with the help of a model framework – the relative effectiveness of monetary and macroprudential policies in achieving price and financial stability objectives. By so doing, it provides a rationale for macroprudential policy and it shows how macroprudential policy can unburden monetary policy in leaning against the wind of financial imbalances.

Empirical investigation on the comparative potency of monetary and fiscal policies is still dubious among two major schools of thought in economics so called classical and Keynesian. Hence, this paper investigates the relative effectiveness of monetary and fiscal policies in affecting economic growth by employing Auto-Regressive Distributive Lag Model (ARDL) for the time spanning from 1975 to 2017. The proxies used in this study for monetary and fiscal policy were Broad money supply (M2) and government consumption expenditure respectively while real GDP at constant prices in 2010 is used as proxy for economic growth in Ethiopia. Anderson and Jordan (1968) “St. Louis equation’’ has been used to estimate the comparative potency of monetary and fiscal policies. The empirical results indicate that both the monetary and fiscal policies have equal statistically significant and positive impact on economic growth in Ethiopia with different significance level and magnitude. Besides of equal effectiveness, the elasticity of real output with respect to fiscal policy variable is greater than the elasticity with respect to money supply which show fiscal policy is more effective than monetary policy in influencing Real GDP in the long-run. However, in the short run, the fiscal policy is effective while that of the monetary policy proxy by money supply is ineffective in affecting output growth in Ethiopia. Therefore, to have continuous and sustainable economic growth, the coordination of monetary and fiscal policies are vital and the lack of this coordination leads to a sharp downturn of overall economic performance, even can hurt the economy.

The Indonesian government policy in encouraging sustainable economic growth to reduce unemployment, poverty and inequality is threatened to fail, because economic growth does not reach targets and is not of quality. The purpose of this research is to explain the four pillars of growth and development namely; human capital, social capital, institutional economics and entrepreneurship as the main drivers of quality and sustainable economic growth. This research method used primary data on entrepreneurship and SMEs in the provinces of Central Java and Yogyakarta. The correlational form of recursive model path analysis was used as analytical method. The research results show the very strong role of human capital as the main key in driving economic growth both directly and indirectly. The existence of human capital and social capital will further encourage new economic institutions, furthermore new economic institutions will encourage the competitiveness of productive entrepreneurship and high, quality, and sustainable regional economic growth. The policy implication is that high, quality, and fundamentally sustainable economic growth must be built on the four main pillars basis namely; human capital, social capital, institutional and entrepreneurship in order to be more successful in reducing development problems; unemployment, poverty and income inequality.

Goal 8 Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all Promote sustained, inclusive and sustainable economic growth, employment and...

SDG 8’s goal is to promote sustained, inclusive, and sustainable economic growth; full and productive employment; and decent work for all. This chapter examines the experiences of East Asian developing countries in achieving rapid and inclusive economic growth by focusing on the role of international tradeand foreign direct investmentnexus created through global value chains (GVCs)by multinational corporations (MNCs). GVCs enabled participating companies and countries to improve productivity, contributing to economic growth. The factors attributable to the participation in GVCs include high competitiveness of local companies and open business environment created by the Asian government. Moreover, construction and maintaining well-functioning soft (e.g., education and legal systems) and hard (e.g., transportation and communication systems) infrastructure by the government and international donors contributed to the creation of business-friendly environment. Faced with growing protectionism and the threats of growing US-China rivalry, infectious diseases, climate change, etc., maintaining an open and transparent rules-based business environment is crucially important to further achieving sustained, inclusive, and sustainable economic growth. In the light of absence of effective global economic order, exemplified by ineffectiveness of the World Trade Organizationin trade liberalization as well as dispute settlement, regional economic frameworks such as the CPTPP and RCEP in the Asia and Pacific region would be proven to be effective to achieve the goal.

Malte Luebker recalls that employment and labour issues were entirely absent from the initial set of MDGs, and that only in 2005, somewhat hastily, a new target was added to address this oversight. He therefore welcomes that the 2030 Agenda for Sustainable Development makes ample reference to employment and inequality. Goal 8 is devoted to 'Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all' and expands on two familiar themes, productivity and employment, while adding labour rights as a new element. The more nuanced treatment of labour arguably presents a notable advance in attaining a wider set of progressive policies concerned with addressing rising inequalities. While the SDGs are strong on some policies that have direct impact on the primary and secondary distribution of incomes, they lack an explicit endorsement of freedom of association and the right to collective bargaining. Hence, they fail to mention the mechanisms that give workers a voice and a meaningful stake in development.

Digital finance is an innovative financial model of great significance for sustainable economic growth. By constructing indicators of sustainable economic growth, we explore the impact of digital finance on sustainable economic growth using the fixed effect model, mediating effect model, threshold regression model, and dynamic spatial Dubin model. The study finds that digital finance can drive sustainable economic growth, and the robustness and endogenous treatment results strongly verify this. Digital finance promotes sustainable growth mainly through technological innovation. In addition, with technological innovation and the development of renewable energy, there is a significant nonlinear relationship between digital finance and sustainable economic growth. Finally, the spatial spillover effect results show that digital finance's impact on sustainable economic growth has a positive effect, whether it is a direct effect or an indirect effect. This article provides possible ideas for digital finance to promote sustainable economic growth.

At the stage of high-quality economic development, sustainable economic growth is worthy of attention. The supporting role of financial development for sustainable economic growth will become more important. This article aims to identify the influence of financial development on sustainable economic growth and its impact mechanism. Based on measuring the level of sustainable economic growth, this article theoretically and empirically identifies the impact of financial development on sustainable economic growth and its mechanism by adopting the panel data from 283 prefecture-level and above cities in China. The empirical results show that financial development is conducive to improving sustainable economic growth through the mechanism of capital deepening and technological innovation. Furthermore, for type I large and medium cities, financial development is conducive to enhancing sustainable economic growth, while the effect is not significant for type II large and small cities. Therefore, the local government could promote financial supply-side reform and implement differentiated financial development strategies for sustainable economic growth from aspects of capital deepening and technological innovation.