Monetary Influences on Economic Growth: Evidence from Five Asian Countries

Abstract

This study investigates the impact of monetary policy on economic growth in five Asian countries Indonesia, India, South Korea, Thailand, and Vietnam using annual data from 2000 to 2024. The analysis employs a panel Autoregressive Distributed Lag (ARDL) model to examine both short-run and long-run relationships between key monetary indicators and GDP growth. The independent variables include real interest rate, real effective exchange rate, money supply (M2), and inflation, while GDP growth represents economic performance. The results reveal that, in the long run, real interest rate and exchange rate have negative and significant effects on economic growth. Higher interest rates and currency depreciation tend to suppress investment and production. Money supply and inflation show no significant long-term influence, indicating that liquidity expansion and price changes have limited structural effects on growth in these economies. The short-run error correction coefficient is negative and significant, implying a rapid adjustment toward equilibrium after economic shocks. The findings suggest that stable monetary management particularly interest rate and exchange rate policies is crucial to support sustainable growth in Asian economies.