The Impact of Monetary Policy and International Trade on Economic Growth and Inflation in ASEAN-4 Countries

Abstract

Economic growth and price stability are the main goals ofmacroeconomics, among other goals. The central bank can influencethe economy to achieve the desired condition through its monetarypolicy. This study aims to analyze the effect of monetary policy andinternational trade on economic growth and inflation in four ASEANcountries (Indonesia, Malaysia, the Philippines, and Thailand),using panel data analysis and vector autoregression. The impulseresponse results show that monetary policy with an interest rate policyinstrument hurts economic growth in the short run and is positive inthe long run. In the short run, an expansionary monetary policy haseffectively accelerated economic growth, vice versa. International tradepositively affects economic growth in ASEAN-4 countries in the shortrun and vice versa in the long run. Panel data analysis shows a pricepuzzle regarding the effect of interest rates on inflation. Likewise, theeffect of international trade on inflation shows a positive influence.An increase in exports encourages an increase in aggregate demandand prices. The implications of the results of this study are the needfor policy coordination monetary policy, trade policy, and policy inthe real sector so that the effectiveness of monetary policy increases.How to Cite:Astuti, R. D., & Udjianto, D. W. (2022). The Impact of Monetary Policy and International Trade on Economic Growth and Inflation in ASEAN-4 Countries. Signifikan: Jurnal Ilmu Ekonomi, 11(1), 175-190. https://doi.org/10.15408/sjie.v11i1.22142.