1. bookVolume 7 (2018): Issue 2 (May 2018)
Journal Details
First Published
11 Mar 2014
Publication timeframe
3 times per year
access type Open Access

Monetary Policy and Economic Growth: A Review of International Literature

Published Online: 14 May 2018
Volume & Issue: Volume 7 (2018) - Issue 2 (May 2018)
Page range: 123 - 137
Received: 12 May 2017
Accepted: 10 Jul 2017
Journal Details
First Published
11 Mar 2014
Publication timeframe
3 times per year

This paper aims to survey the existing literature, both theoretical and empirical, on the relationship between monetary policy and economic growth. While there has been a wide range of studies on the existing relationship between monetary policy and economic growth, the nexus between the two remains inconclusive. This paper takes a comprehensive view of the theoretical evolution of the relationship and the respective recent empirical findings. Overall, this paper shows that the majority of findings support the relevancy of monetary policy in supporting economic growth, mainly in financially developed economies with fairly independent central banks. The relationship tends to be weaker in developing economies with structural weaknesses and underdeveloped financial markets that are weakly integrated into global markets. This paper concludes that monetary policy matters for growth both in the short-run and long-run despite the prevailing ambiguous relationship. The paper recommends intensive financial development measure for developing countries as well as structural reforms to address to supply side deficiencies.


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