COMPARING EFFECTIVENESS OF MONETARY AND FISCAL POLICIES ON REAL AND NOMINAL SIDES OF THE ECONOMY: A MACRO PANEL ANALYSIS OF SELECTED DEVELOPING COUNTRIES

Abstract

This paper checks the relative effectiveness of monetary and fiscal policies on real and nominal sides of economy in 11 selected developing countries. The paper employed panel (ARDL) method of pooled mean group estimators using the annual data from 1961 to 2020. To check the robustness of PMG results, the study employed panel DOLS and panel FMOLS. The findings of this study indicated that fiscal policy has a stronger effect than monetary policy in case of developing county on real sector. While, the influence of monetary policy is stronger in changing the nominal side of economy such as price level. In addition to this, the findings also revealed that fiscal policy has no impact on nominal side such as price level. Interestingly, the obtained results are according to economic theory. Finally, the results are consistent and have very important policy implication.