The Impact of Monetary Policy on Economic Growth in Cambodia: Bayesian Approach

Authors: 
Monorith Sean
DOI Number: 
http://doi.org/10.31039/jomeino.2019.3.2.2
Abstract: 
This research paper aims to study the significance of monetary policy in the contribution to the economic growth of Cambodia. This study employs the data in the period of 2000-2018 consisting in total 19 years. Once the GDP of Cambodia is characterized as the limited dependent variable, the Tobit model is an appropriate model to be used. However, due to the limited data which only consists of 19 observations, this study uses Bayesian inference. The combination between Tobit model and Bayesian inference is known as Bayesian Tobit Model. The Bayesian Tobit Model with Markov chain Monte Carlo simulation uses Gibbs sampling to sample all conditional posterior distributions. The empirical results illustrate that money supply which represents the monetary policy tool is statistically indicated a positive correlation with GDP in Cambodia. Moreover, the inflation rate and exchange also revealed a positive relationship with GDP. The interest rate, on the other hand, is confirmed negatively insignificant with GDP which represents economic growth in Cambodia. Based on statistical results, the National Bank of Cambodia plays a vital role in authorizing the monetary policy in Cambodia.
Keywords: 
Bayesian Tobit Model, MCMC, Gibbs Sampling, and Limited Dependent Variable.
Full Text: 
File download
References: 

ADB. (2017). Key Indicators for Asia and the Pacific. Asian Development Bank.

Agbonlahor, O. (2014). The Impact of Monetary Policy on the Economy of United Kingdom: Vector Error Correction Model (VECM). European Scientific Journal. 19-42.

Amarasekara, C. (2007). The Impact of Monetary Policy on Economic Growth and Inflation in Sri Lanka. Staff Studies.1-44.

Bentum-Ennin, I. (2014). International Reserve Accumulation and Economic Growth in the West African Monetary Zone. International Research Journal of Marketing and Economics. 31-56.

Chib, S. (1992). Bayes inference in the Tobit censored model. Journal of Econometrics, 79-99.

Dilshad Ahmad, M. A., & Mohammad, A., & Usman, G,. (2016). Impact of Monetary Policy on Economic Growth Empirical Evidence of Pakistan. International Journal of Applied Economic Studies.1-9.

Ferdiun, M. (2005). Impact of Monetary Policy on Economic Instability in Turkey (1983-2003). Prague Economic Papers, Vol 14, No 2.

Geyer, C. (1992). Practical Markov Chain Monte Carlo. Statistical Science, Vol 7, No 4. 473-484.

Gokal, V., and Hanif, S. (2004). Relationship between Inflation and Economic Growth. Economics Department, Reserve Bank of Fiji, Suva Fiji.

Gul, H., Mughal, K., & Rahim, S. (2012). Linkage between Monetary Instruments and Economic Growth. Universal Journal of Management and Social Sciences, Vol 2. 69-76.

Hameed, I. (2010). Impact of Monetary Policy on GDP. Interdisciplinary Journal of Contemporary Research in Business, Vol 3, No 1. 1348-1361.

Moolio, Mardy Lut & Palaj (2015). The Impact of Monetary Policy on Economic Growth in Cambodia. Journal of Management for Global Sustainable Development. 40-63.

NBC. (2016). Annual Report. Phnom Penh: National Bank of Cambodia.

NBC. (2016). Dollarization in Cambodia: Evidence from a Survey Conduct in 2015-2016. Phnom Penh: National Bank of Cambodia.

Palesa, Chipote Precious & Makhetha-Kosi (2014). Impact of Monetary Policy on Economic Growth: A Case Study of South Africa. Mediterranean Journal of Social Sciences, Vol 5, No 15. 76-84.

Rehman, U. H and Ahmed, I. (2002). Impact of Monetary Policy on Monetary Assests in Pakistan a Money Multiplier Approach. Pakistan Economics and Social Review, Vol XL, No 2, 199-208.

Serey, C. (2017). Roles of the Central Bank and Her Monetary Policy. Phnom Penh: National Bank of Cambodia.

Page: 
16-34.
Issue: 
Volume 3, Number 2, May-August 2019
Content Status: 
Published