TITLE:
The Impact of Monetary Policy Dynamics on Economic Growth: A Case Study of Mozambique
AUTHORS:
Ernesto Munguambe Gabriel, Vasco Macarringue Darcilio
KEYWORDS:
Monetary Policy Impact, ARDL Model Analysis, Macroeconomic Stability, Mozambique
JOURNAL NAME:
Modern Economy,
Vol.15 No.11,
November
21,
2024
ABSTRACT: The study explores the repercussions of monetary policy fluctuations on economic growth in Mozambique. Considering Mozambique’s history of political instability and economic hardship, assessing this link is imperative. The primary aim is to analyze the relationship between real GDP and the crucial monetary policy variables: real interest rate, money supply, exchange rate, and inflation. The research incorporates annual time series data from 1981 to 2021 and utilizes the Auto Regressive Distributed Lag (ARDL) model to examine simultaneously short-run and long-run dynamics. Descriptive and inferential statistical approaches, including unit root testing and correlation analysis, ensure the dependability of the data. The ARDL bounds test and error correction model (ECM) are utilized to determine co-integration and adjustment mechanisms. The results indicate that monetary policy significantly affects economic growth in Mozambique. The money supply and exchange rate positively impact GDP, whereas the real interest rate and inflation negatively affect it. These findings underscore the vitality of effective monetary policy in promoting economic growth, offering critical insights for policymakers in developing nations.