FISCAL AND MONETARY POLICIES IN ASEAN : IMPLICATIONS FOR GROWTH

Abstract

The purpose of this research is to examine the effects of macroeconomic policy on the growth of Asean economies. In particular, Its interest is in the implications of monetary and fiscal policies on growth objectives when economies experienced economic disturbances during the time frame of 1970-90. It is recognized that although monetary and fiscal policies alone are not sufficient conditions for growth, nonetheless, they may constitute an enabling framework or tum into stumbling blocks hampering growth. Some of the questions that are raised and investigated are 1) What are the major sources of growth in Asean countries; 2) What is the relationship between economic stability, via monetary and fiscal policies, and growth; 3) What are the roles monetary and fiscal policies play on growth; 4) What are the implications of external and domestic disturbances on growth when the macroeconomic policy responses to them are taken into account. Chapter 2 looks at some selected conceptual issues on growth and macroeconomic policy: basically, the concept of growth, what growth really means and how it matters to countries. A brief discussion of the factors influencing growth, based on the model by Todaro, Michael P. (1989), is employed to give insights on factors affecting growth. This is followed by an evaluation of the role monetary and fiscal policies play on growth in the context of an open economy. A research on the macroeconomic objectives of Asean countries is presented in Chapter 3. This is followed by an analysis on Asean countries' macroeconomic developments and their consistency with growth objectives. In particular, a close-up on individual Asean countries' macroeconomic development is assessed in order to critically determine the impact of the various macroeconomic factors affecting growth. A study of the effects of major external and domestic factors affecting growth in Asean countries will be dealt with in Chapter 4. External demand and supply changes had a positive impact on some Asean countries while they adversely affected others. The type of macroeconomic responses that Asean economies adopted are identified and this is followed by an assessment of the effectiveness of these policies in restoring stability and navigating economies towards their economic objective of growth. Chapter 5 summarizes the main issues and concludes the paper.