MetaTOC stay on top of your field, easily

Exploring the Impact of Monetary Policy and Institutional Quality on Inflation, Investment, and Economic Growth in G‐10 Economies

, ,

Natural Resources Forum

Published online on

Abstract

["Natural Resources Forum, EarlyView. ", "\nABSTRACT\nThe dimensions of monetary policy and institutional quality have a significant role in shaping macroeconomic stability, influencing inflation control, investment flows, and the long‐term trajectory of economic growth. The purpose of the present study is to investigate the impact of monetary policy (interest rate; exchange rate) and institutional quality (Political Stability; Absence of Violence) on inflation (CPI), investment (FDI), and economic growth (GDP) in G‐10 countries using contemporary econometric methodologies from 1996 to 2022. The methodology includes the use of second‐generation unit root tests, the Westerlund co‐integration test, CCEMG technique, and FMOLS and DOLS estimation. The results showed that monetary policy and institutional quality have a negative impact on inflation. The exchange rate negatively affects investment, while the interest rate and institutional quality positively influence investment. Additionally, the exchange rate and institutional quality positively impact economic growth, whereas the interest rate has a negative effect on economic growth. Therefore, policymakers must exercise caution when attempting to incentivize investment through interest rate policies. This is to make sure that interest rates don't unintentionally slow down the economy's growth or disrupt inflation stability. The prime focus of the present study is to assess the role of monetary policy implications along with strong institutions on inflation, investment, and economic growth.\n"]