Abstract
The empirical analysis of this study examines the effect of monetary policy on economic growth in Lao PDR. This study uses Vector Autoregressive Model (VAR) and quarterly data from the first quarter of 1995 to the last quarter of 2018. The results found that GDP was negatively responding to price level indicates that a shock in monetary policy or when the central bank adopts an expansionary monetary policy will result in consumer price level, and therefore leads to decline on the real output in the Lao economy. Moreover, this study also found negative effect of the real interest on GDP in Lao PDRD.
Highlights
Monetary policy is a key factor of macroeconomic management in both developed and developing economies
This paper present an empirical analysis of the effect of monetary policy on economic growth in Lao PDR, which its economy was relatively close compare to its neighbouring countries and the financial market is on the first stage of its development (Dat et al, 2012) (Srithilat et al, 2018)
The empirical results show a notable effect of monetary policy on economic growth in the Lao economy
Summary
Monetary policy is a key factor of macroeconomic management in both developed and developing economies. This paper present an empirical analysis of the effect of monetary policy on economic growth in Lao PDR, which its economy was relatively close compare to its neighbouring countries and the financial market is on the first stage of its development (Dat et al, 2012) (Srithilat et al, 2018). Conducting monetary policy mostly relied on direct instrument in order to serve the government economic goal and economic liquidity Economic growth is found to be negative in responding to expansionary monetary policy
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