The Growth Effect of the Expansionary Monetary and Fiscal Policies Applied in the Periods When the Economies Shrank: Developed and Developing Countries Cases
Expansionary policies are implemented in periods when economies shrink
and are generally considered to have a positive effect on growth. However, the
structural differences, development levels and basic growth dynamics of the
economies are as decisive as the applied policy set and composition. In this
study, the effects of expansionary monetary and fiscal policies applied in developed and developing countries during the
economic recession on growth are examined, considering basic growth dynamics,
and the short- and long-term outlooks are analyzed. To measure the
effectiveness of expansionary policy in developed and developing countries, 55
developed and 55 developing countries are studied. For each monetary and
fiscal policy, the 2007-2009 period applications are considered, while the
effects of the main growth variables are examined during the 2007-2016 period.
The system GMM method is used in the panel to see the reflections of policy
effectiveness on growth in the 10 years. While the results reveal how structural
differences in the two country groups affect the effectiveness of policies,
they also show that monetary and fiscal policies have different effects on
growth.
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