Article

The Impacts of South Asian Journal of

Macroeconomics
Monetary and and Public Finance
9(1) 114–130, 2020
Fiscal Policies on © 2020 SAGE Publications India
Private Limited
Economic Growth Reprints and permissions:
in.sagepub.com/journals-permissions-india
in Malaysia, DOI: 10.1177/2277978720906066
journals.sagepub.com/home/smp
Singapore and
Thailand

Chai-Thing Tan1, Azali Mohamed2

Muzafar Shah Habibullah2 and Lee Chin2

Abstract
This article analyses the impact of monetary and fiscal policies on
economic growth in Malaysia, Singapore and Thailand from 1980:Q1 to
2017:Q1. Autoregressive distributed lag (ARDL) approach is employed
to determine the long-run relationship. Further, a range of econometric
models, such as fully modified least squares method (FMOLS), canonical
cointegration regression (CCR) and dynamic ordinary least squares
method (DOLS), are applied to check the robustness. The results
are stable and robust as all the models yield consistency result. The
main findings in this study demonstrate that: (a) interest rate had a
negative impact on economic growth in three selected countries.

1
Faculty of Business and Finance, Universiti Tunku Abdul Rahman, Kampar, Perak, Malaysia.
2
Faculty of Economics and Management, Universiti Putra Malaysia, UPM Serdang, Selangor,
Malaysia.

Corresponding author:
Chai-Thing Tan, Faculty of Business and Finance, Universiti Tunku Abdul Rahman, Kampar,
Perak 31900, Malaysia.
E-mail: [email protected]
Tan et al. 115

(b) Government spending had a negative impact on economic growth

in Malaysia and Singapore, but had a positive impact in Thailand. (c)
Monetary policy is more effective in Malaysia and Singapore, while fiscal
policy is more effective in Thailand.

Keywords
Monetary policy, fiscal policy, ARDL, FMOLS, CCR, DOLS
JEL Classification: E52, E58, E62, C01

Introduction
Macroeconomic policies play a vital role in stabilizing prices and eco-
nomic growth and are applied when crises occur. Most countries around
the world have responded to crises by cutting interest rates and injecting
additional liquidity into their financial system (Heyzer & Mochida,
2009). Yet, not all countries have the flexibility to implement such poli-
cies as they depend on the design (e.g., monetary union) or the circum-
stances of their monetary policy (Tomsik, 2012). Countries with lower
interest rates may miss out on the policy’s effectiveness as additional
interest rate cuts could destabilize their currencies by triggering capital
outflows (Heyzer & Mochida, 2009). Given the constraints of monetary
policy under this situation, fiscal policy has been used to stabilize eco-
nomic growth and for inflation control (Kirsanova, Leith, & Wren-
Lewis, 2009). The introduction of fiscal stimulus packages is able to
boost domestic demand and help to counteract any loss in economic con-
fidence (Heyzer & Mochida, 2009). Yet, unsustainable spending may
lead to massive budget deficits that may lead to high levels of public
debt. Without these policy responses, economies may suffer a deep and
prolong recession (Prakash, Scott, & Terrones, 2009), however, policy
missteps may cause any crisis to become severe. Which kind of policy is
most appropriate to recover economic growth—monetary or fiscal?
Keynesian economists believed that an expansionary fiscal policy
could increase the aggregate demand and output level through the
multiplier effect. While, Monetarists have viewed that monetary policy
has a more significant role than fiscal policy. Monetarists believed
money supply and economic growth are positively related, as the output
will increase due to the increase in stock of money. There is no clear
116 South Asian Journal of Macroeconomics and Public Finance 9(1)

answer as to the appropriate monetary or fiscal policy in this context. It

is clear that to prevent a crisis, a country must have a better plan with
which to understand and forecast the actions of its government to respond
to such events. However, most existing research has focussed either
on the roles of monetary policy or fiscal policy individually, but has
rarely focussed on the combination and interactions between monetary
and fiscal policies. Therefore, governments should urgently consider
improved policies. By studying the impact of the monetary and fiscal
policies, this may provide guidelines for governments when similar
crises occur in the future.
The aim of this article is to examine the impact of monetary and fiscal
policies on economic growth in Malaysia, Singapore and Thailand.
These countries were chosen as they have common economic character-
istics and have experienced similar demographic changes (Khalid &
Fakhzan, 2013). Specific focusses are given to two key issues. First, the
study examines the impact of monetary and fiscal policy on economic
growth. Understanding how the economy is affected by the policy would
be important information to policymakers in making better policy for-
mulation. Second, the study assesses the relative importance of monetary
and fiscal to economic growth of each country under study. Thus, this
article answers two research questions: What is the impact of monetary
policy or fiscal policy on economic growth? Is monetary policy more
effective than fiscal policy on economic growth? This study employs an
autoregressive distributed lag (ARDL) approach to determine the long-
run relationship between policies and economic growth to answer the
two research questions.
The rest of the article is organized into six sections. Section 2 reviews
the literature, Section 3 describes the methodology. Section 4 discusses
the data and empirical results. Section 5 provides the robustness
checking. Section 6 concludes.

Literature Review
This article adds to the empirical literature on the relationship of
monetary and fiscal policy on economic growth as these two policies are
frequently used to accelerate economic growth.
Many studies have explored the relationship between government
spending and economic growth. By using various theories and research
approaches, the results have shown mixed results, that is, both positive
Tan et al. 117

and negative. By using the structural VAR approach, Blanchard and

Perotti (2002) discovered that government spending has a positive effect,
however, taxation has a negative effect, on output. Besides that, Marvão
Pereira and Roca-Sagalés (2011) who studied the effect of fiscal policies
at the aggregate and disaggregate level using the Cholesky decomposition
for shock identification focussing on Portugal found results that were
consistent with Blanchard and Perotti (2002). A number of researchers,
such as Jiranyakul and Brahmasrene (2007), Chatziantoniou, Duffy, and
Filis (2013), Mutuku and Koech (2014), Ćorić, Šimović, and Deskar-
Škrbić (2015) and Nursini (2017), also found that fiscal policy has a
positive relationship with output. These results have proven the validity
of the classical Keynesian theory.
However, the concept of a smaller tax multiplier and a larger spending
multiplier, advocated by the Keynesian theory, was not established.
Mountford and Uhlig (2009) revealed that the impact of tax multipliers
was greater than the spending scenario. In contrast, Bukhari and Yusof
(2014) and Hasnul (2015) found that government spending and the real
GDP were negatively related due to the predominance of the crowding
out effect against the multiplier effect. Their results were supported by
Ramayandi (2003) who argued that higher government spending may
induce the government to collect more taxes which would, in turn create
a burden on the productive sector. Furthermore, both Sutherland (1997)
and Perotti (1999) showed that a significant public debt-to-GDP ratio
negatively affected the real GDP. On the other hand, Jha, Mallick, Park,
and Quising (2010) and Tang, Liu, and Cheung (2013) found that
government spending has an insignificant impact on output in Asian
countries.
By looking into periods of recession, some economists have argued
that the government should implement expansionary fiscal policies to
combat recession because fiscal policy has a direct impact on aggregate
demand. Baum, Poplawski-Ribeiro, and Weber (2012) proved that
contractionary fiscal policies implemented during recessions harms
economic growth, which is consistent with Rafiq (2012). Besides this,
Baldacci, Gupta, and Mulas-Granados (2009) found that fiscal expans-
ions on government consumption were more effective in stimulating
economic growth when compared to the expansion of public investment
or a cut in income tax, however, public investment yielded the strongest
impact on output recovery after the crisis. Likewise, Prakash et al. (2009)
found that the effectiveness of the recovery from recession was smaller
for countries that had higher public debt. Similarly, Magud (2008) argued
that countercyclical polices are only effective in countries having a lower
118 South Asian Journal of Macroeconomics and Public Finance 9(1)

government debt-to-GDP ratio when the asymmetric business cycles are

taken into account. Thus, countercyclical fiscal policies can be seen to
have shortened the recessionary period during financial crises (Baldacci
et al., 2009; Prakash et al., 2009). In contrast, Slimane and Tahar (2010)
discovered that countries in the MENA region had to run procyclical
policies because they were unable to run countercyclical fiscal policies,
this was especially true for those countries with weak institutions, less
access to the international and domestic credit market, as well as
democratic political regime.
Much research has been carried out to examine the relationship of
monetary policy with economic growth, yet with little consensus to date.
A number of studies have proved that expansionary monetary policy is
important for economic growth (Ahmad, Afzal, & Ghani, 2016; Ćorić
et al., 2015; Gul, Mughal, & Rahim, 2012; Hansen & Seshadri, 2013;
Vinayagathasan, 2013). Christiano, Eichenbaum, and Evam (1994) and
Sims (1992) were consistent in their findings with the view that the
Federal funds rate was a good proxy for the stance of monetary policy.
Tang (2006) also found that the interest rate is important in influencing
both output and inflation. This was consistent with Srithilat and Sun
(2017) and Perera (2016). However, Ufoeze (2018) found that the mon-
etary policy rate and the interest rate have an insignificant positive rela-
tionship on economic growth. This was in line with Nyamonga, Sichei,
and Mutai (2008), Mutuku and Koech (2014) and Kamaan and Nyamongo
(2014).
Some studies have analysed the effectiveness of monetary policy
using the VAR model. Azali and Matthews (1999) found that money was
more important in influencing output during the post-liberalization
period. Meanwhile, Fung (2002) found that nearly all of the impulse
responses to interest rate shocks were insignificant in the post-crisis
period. Furthermore, there were ‘puzzles’ found in the VAR analysis
(such as output puzzle) and these ‘puzzles’ reduced the accuracy of the
results. Cheng (2006) found that a contractionary monetary policy led to
an initial increase in output which eventually fell.
To the best of the author’s knowledge, there have only been a few
published empirical studies that have estimated the monetary and fiscal
policy for Malaysia, Thailand and Singapore. Most of the economics
studies have focussed on the effectiveness of monetary (Akalpler &
Duhok, 2018; Ghazali, Amin, Muhammad, & Samsu, 2009; Khin,
Thambiah, Chau, Mohamadpour, & Balkrishan, 2014; Maitra, 2011) or
fiscal policy (Hasnul, 2015; Jiranyakul & Brahmasrene, 2007; Nakornthab,
2009; Rafiq, 2013; Tang et al., 2013) individually in stabilizing the
Tan et al. 119

economic growth. Fatima and Iqbal (2003) examined the effectiveness of

policies on economic growth in five Asian countries1 using granger cau-
sality. Meanwhile, Nidhiprabha (2010) found fiscal policy is less effec-
tive in Thailand. Nevertheless, it is important to jointly analyse and
evaluate monetary and fiscal policy on economic growth since they both
affect macroeconomics activities simultaneously.

Methodology

Autoregressive Distributed Lag

This article employed the ARDL model to estimate the relationship
between monetary and fiscal policy on economic growth. The main
reason to apply this methodology is that this approach allows the testing
of a combination of level variables with different orders of integration
such as I(0) or I(1), it is, however, not applicable to I(2) regressors.
Pesaran, Shin, and Smith (1999) claimed that changing the order able to
simultaneously correct the serial correlation and endogenous regressor
problem.
In estimating the determinants of output, the general model is speci-
fied as follows:

Z=ƒ(MMR,G) (1)

The equation specifies that gross domestic product (Y) is a function of

interest rate (MMR), government spending (G).
The ARDL framework of Equation (1) can be written as:
p
DZ t = b 0 + b 1 MMR t–1 + b 2 G t–1 + | c 1i DZ t–i +
t=1
q r
(2)
| c 2i DMMR t–i + | c 3i DG t–i + u t Y
i–0 i–0

where Δ refers to the first-difference operator; p, q and r refer to the

optimum lag length used in the model.
There are two steps to estimate the presence of cointegration between
the variables. First, Equation (2) will be estimated by ordinary least

1
The five Asian countries included Pakistan, India, Thailand, Indonesia and Malaysia.
120 South Asian Journal of Macroeconomics and Public Finance 9(1)

squares (OLS) method and then carry out the F-test for the joint
significance of the lagged levels of the variables. Then, presents the
long-run relationship by restricting all lagged level variables equal to
zero. The null hypothesis of no cointegration among the variables in
Equation (1) is H0: β1 = β2 = 0 and the alternative hypothesis of
cointegration is H0: β1 ≠ β2 ≠ 0.
Next, the Wald-test (F-statistic) is used to examine the outcome of the
test. The F-test is non-standard under the null hypothesis of no
co-integration among the variables. It depends on whether the variable
used contains intercept and/or trend, I(0) or I(1), the number of
explanatory variables and the sample size. The lower critical bound and
upper critical bound are the two critical values provided by Pesaran and
Shin (1998) and Pesaran, Shin, and Smith (2001). The null hypothesis is
rejected if the F-statistics are greater than the upper level bound. This
concludes that all of the variables are cointegrated in the long-run.
After adopting the ARDL approach, both the short and long-run
dynamic relationships can be estimated. Therefore, Equation (3) can be
rewritten by including the error correction term, as shown below:
q q
DY t = b 0 + + | c i DMMR t - i + | c i DG t - i
i=0 i=0 (3)
+ vECTt - 1 + o Yt
where ECTt−1 is the error correction model term representing the speed
of adjustment to the long-run equilibrium following a short run shock. It
has to be statistically significant and negative to show that the variables
were converted to the long-term equilibrium.

Data and Empirical Results

Data and Preliminary Analysis

This article used data for Malaysia, Singapore and Thailand. The data are
available at quarterly frequency over the period 1980:Q1–2017:Q1. The
variables included in the ARDL model are as follows: (1) real GDP (Yt),
which is used to capture the economic activity; (2) money market rate
(MMRt), which is used to capture the monetary policy stance; (3)
government spending (Gt), which is used as the fiscal policy instruments.
All of the variables are shown as natural logarithms except for the
interest rates. All of the time-series data involved in this study were
adjusted for seasonality. The source of data is from Datastream.
Tan et al. 121

All the variables used in the estimation are tested by Augmented

Dickey–Fuller (ADF) tests and Phillips–Perron (PP) tests, the results are
represented in Tables 1–3. The result shows that the series for all three
countries studied are integrated of order 1 or below. This shows that the

Table 1. Results of Unit Root Tests in Malaysia

Constant Without Trend Constant with Trend

Panel A: Level
Variable ADF PP ADF PP
Y −0.91(12) −1.25(11) −1.57(8) −2.10(11)
MMR −2.54(6)* −2.58(3)* −3.67(6)* −3.58(2)**
G −1.53(7) −6.41(11)*** −2.57(7) −13.81(10)***
Panel B: First difference
Y −2.79(11)* −13.83(11)*** −3.80(7)** −14.04(11)***
MMR −9.60(1)*** −8.80(8)*** −9.56(1)*** −8.76(8)***
G −7.14(6)*** −48.90(13)*** −7.16(6)*** −48.46(13)***
Source: Author’s computation.
Notes: The parentheses show the number of lags in order to solve the autocorrelation.
*, ** and *** Express rejection of unit root at the 10%, 5% and 1% significance levels,
respectively.

Table 2. Results of Unit Root Tests in Singapore

Constant Without Trend Constant with Trend

Panel A: Level
Variable ADF PP ADF PP
Y −1.43(13) −2.08(8) −1.27(13) −1.73(8)
MMR −2.07(11) −2.40(9) −3.16(11)* −3.43(5)*
G −2.07(12) −6.41(11)*** −2.17(12) −10.38(11)***
Panel B: First difference
Y −3.19(11)** −12.40(8)*** −3.54(11)** −12.67(8)***
MMR −4.51(10)*** −12.51(9)*** −4.59(10)*** −12.81(10)***
G −3.30(10)** −33.50(14)*** −3.47(10)** −34.57(14)***
Source: Author’s computation
Notes: The parentheses show the number of lags in order to solve the autocorrelation.
*, ** and *** Express rejection of unit root at the 10%, 5% and 1% significance levels,
respectively.
122 South Asian Journal of Macroeconomics and Public Finance 9(1)

Table 3. Results of Unit Root Tests in Thailand

Constant Without Trend Constant with Trend

Panel A: Level
Variable ADF PP ADF PP
Y –1.90(13)*** –1.71(12) –2.24(12) –1.77(12)
MMR –2.31(5) –2.41(1) –4.37(3)*** –3.63(2)**
G –0.94(8) –1.48(12) –1.96(13) –9.91(10)***
Panel B: First difference
Y –3.56(3)*** –12.82(12)*** –4.17(5)*** –13.48(12)***
MMR –4.77(12)*** –10.01 (4)*** –4.76(12)*** –9.98(4)***
G –5.38(7)*** –31.57(12)*** –5.41(7)*** –31.70(12)***
Source: Author’s computation
Notes: The parentheses show the number of lags in order to solve the autocorrelation.
** and *** Express rejection of unit root at the 10%, 5% and 1% significance levels,
respectively.

ARDL is an appropriate estimation method to examine the presence of a

long-run relationship among the variables.

Autoregressive Distributed Lag

Table 4 shows the results of F-statistic test that examine the null
hypothesis that is no cointegration among the variables. The maximum
lag is determined using the Akaike information criterion (AIC). Based on
the Table 4, the results concluded that there is a long-run relationship of
monetary and fiscal policies on economic growth at 1 per cent in three
countries. The values of the F-statistic in Malaysia (19.31), Singapore
(11.59) and Thailand (5.74) were found to be greater than the upper
bound (3.76). This test result suggests that a long-run relationship existed
between Y, MMR and G for Malaysia, Singapore and Thailand. Given
the existence of cointegration, the long-run coefficients are estimated.

Table 4.  Cointegration Test in Malaysia, Singapore and Thailand

Malaysia Singapore Thailand

Model specification F-statistic F-statistic F-statistic
Y = f(MMR,G) 19.31(2)*** 11.59(2)*** 5.74(2)***
Source: Author’s computation.
Note: *** Denote the significance at the 1% levels.
Tan et al. 123

Table 5 shows the results of the estimated Equation (2). The parenthe-
sis after the model shows the ARDL model specifications selected based
on the AIC. For example, Malaysia (3, 0, 0), Singapore (2, 3, 3) and
Thailand (1, 0, 0) show the number of lags. For each country, the results
have been reported in three Panels. Panels A and B show the long-run
normalized estimated coefficients and error correction terms. The t-
statistics of each variable are shown in parenthesis.
The coefficient of the interest rate (MMR) is negative and statistic-
ally significant on the real GDP in all three countries. The coefficients
suggest that one per cent increase in interest rate would cause the real
output decrease by 0.0819 per cent, 0.0948 per cent and 0.0343 per cent,
respectively, in Malaysia, Singapore and Thailand. This is in line with
the theoretical view that expansionary monetary policy will decrease
economic growth. The finding is consistent with the findings of the study
of Srithilat and Sun (2017), Gul et al. (2012) and Ahmad et al. (2016).
On the other hand, the coefficient of government spending on real
GDP is negative in Malaysia and Singapore, but positive in Thailand.
The results suggest the existence of non-Keynesian effects in Malaysia
and Singapore. The negative effect could be the predominance of the
crowding-out effect against the output effect. The findings showed an
asymmetric outcome across the countries, but with idiosyncratic char-
acteristics such as the presence of large shadow economy in Thailand

Table 5.  Long-run Coefficients for Malaysia, Singapore and Thailand

Malaysia ARDL Singapore ARDL Thailand ARDL

Variables (1, 0, 0)a (2, 3, 3)b (1, 0, 0)c
Dependent variable Y
Panel A: Estimated long-run coefficients
MMR −0.0819 −0.0948 −0.0343
(−1.95)* (−1.83)* (−1.69)*
G −0.9373 −0.7911 0.5814
(−4.98)*** (−2.10)** (2.75)***
C 16.0142 13.9559 4.4409
(29.46)*** (12.97)*** (3.28)***
Panel B: Error correction term
ECTt−1 −0.0339 −0.0213 −0.0651
(−8.91)*** (−6.88)*** (−4.85)***
Source: Author’s computation.
Note: a, b and c Refer to the ARDL selected based on the Akaike Information Criterion.
The figures in parenthesis are t−statistics. *, ** and *** Denote significance at the 10%, 5%
and 1% levels, respectively.
124 South Asian Journal of Macroeconomics and Public Finance 9(1)

(average size of 66%–70% of GDP) as compared to Singapore (average

size of 11%–15% of GDP) and Malaysia (average size of 16%–20% of
GDP). The existence of the shadow economy tends to misrepresent the
true size of a country’s economy (Tan, Habibullah, Kaliappan, &
Radam, 2017).
By comparing the relative importance between the policies, it is found
that monetary policy is more effective in Malaysia and Singapore, while
fiscal policy is more effective in Thailand.
The values of the ECTt−1 terms were negative and statistically
significant as expected by theory. The speed of adjustment implied that
it would take approximately 7 years in Malaysia, 12 years in Singapore
and 4 years in Thailand to converge back to the equilibrium path.

Robustness Checking
To reaffirm the results obtained in the ARDL model, this study also pre-
sents the fully modified least squares method (FMOLS), dynamic ordinary
least squares method (DOLS) and canonical cointegration regression
(CCR) test to account for the robustness of long-run parameters. Various
estimators are used to make sure the result obtained is robust.
FMOLS estimator of Phillips and Hansen (1990) estimate the long-run
parameter using the semi-parametric approach, it provides a consistent
parameter even in the small sample size and encounters the problem of
endogeneity, serial correlation effects, omitted variable bias, measurement
errors and allows for the heterogeneity in the long-run parameters
(Priyankara, 2018).
Park (1992) introduced another method named CCR to estimate the
cointegrating vectors in the model. Different with FMOLS, CCR only
focusses on data transformation while FMOLS focuses on both data and
parameters transformation (Adom, Amakye, Barnor, & Quartey, 2015).
CCR can apply multivariate regression without modification and losing
the efficiency (Park, 1992).
The DOLS (Stock & Watson, 1993) uses a parametric approach in
estimating the long-run relationship in the model, where the variables are
cointegrated but in different order (Masih & Masih, 1996). By including
the leads and lags the model encounters the simultaneity bias and small
sample bias (Kurozumi & Hayakawa, 2009). The estimators of DOLS
are asymptotically efficient and unbiased.
The three estimated techniques are showed in Tables 6–8. The results
of long-run estimation of all three techniques provide very similar results
to the ARDL results in signs and magnitudes.
Tan et al. 125

Table 6.  ARDL, FMOLS, DOLS and CCR on Y in Malaysia

Variables ARDL FMOLS DOLS CCR

MMR −0.0819 −0.0337 −0.0329 −0.0337
(−1.95)* (−2.43)** (−2.20)** (−2.44)**
G −0.9373 −1.2138 −1.1975 −1.2138
(−4.98)*** (−19.54)*** (−18.67)*** (−19.57)***
C 16.0142 16.1322 16.0716 16.1322
(29.46)*** (81.08)*** (79.83)*** (81.13)***
ECT (t−1) −0.0339 – – –
(−8.91)***
Source: Author’s computation.
Note: Figures in parenthesis are t-statistic. *, ** and *** Denote the significance at the
10%, 5% and 1% levels, respectively.

Table 7.  ARDL, FMOLS, DOLS and CCR on Y in Singapore

Variables ARDL FMOLS DOLS CCR

MMR −0.0948 −0.0337 −0.0329 −0.0336
(−1.83)* (−2.43)** (−2.19)** (−2.43)**
G −0.7911 −1.2138 −1.1980 −1.2138
(−2.10)** (−19.53)*** (−18.65)*** (−19.56)***
C 13.9559 16.1322 16.0737 16.1323
(12.97)*** (81.05)*** (79.74)*** (81.09)***
ECT (t−1) −0.0213 – – –
(−6.88)***
Source: Author’s computation.
Note: Figures in parenthesis are t-statistic. *, ** and *** Denote the significance at the
10%, 5% and 1% levels, respectively.

Table 8.  ARDL, FMOLS, DOLS and CCR on Y in Thailand

Variables ARDL FMOLS DOLS CCR

MMR −0.0343 −0.0082 −0.0077 −0.0081
(−1.69)* (−1.89)* (−1.58) (−1.90)*
G 0.5814 0.8505 0.8451 0.8510
(2.75)*** (22.25)*** (20.36)*** (22.35)***
C 4.4409 2.6642 2.6945 2.6611
(3.28)*** (11.93)*** (11.00)*** (12.00)***
ECT (t−1) −0.0651 – – –
(−4.85)***
Source: Author’s computation.
Note: Figures in parenthesis are t-statistic. *, ** and *** Denote the significance at the
10%, 5% and 1% levels, respectively.
126 South Asian Journal of Macroeconomics and Public Finance 9(1)

Conclusion
Monetary and fiscal policies are the two important policies used to
combat recession. This article investigates the long-run relationship
between monetary and fiscal policies on economic growth in Malaysia,
Singapore and Thailand from 1980:Q1 to 2017:Q1 using ARDL
approach. These countries were chosen as they have common economic
characteristics and have experienced similar demographic changes
(Khalid & Fakhzan, 2013); however, it showed an asymmetric outcomes
across the countries. The results show that monetary policy had a
negative relationship on economic growth in Malaysia, Singapore and
Thailand. The government spending has a negative relationship with
economic growth in Malaysia and Singapore, but positive in Thailand.
The results further reveal that monetary policy is more effective on
economic growth in Malaysia and Singapore, while fiscal policy is more
effective on economic growth in Thailand. These findings are further
confirmed by using the FMOLS, DOLS and CCR tests.
Even though the countries’ outcomes are asymmetric, it should be
remembered that monetary and fiscal policies are mutually dependent, it
requires a consistent and sustainable policy-mix framework to avoid
possible inconsistencies.From policy perspective, the results suggest the
importance of incorporating both monetary and fiscal policies in a single
model as their interaction exerts significantly on economic growth, thus
both policies should be considered in tandem rather than in isolation.

Declaration of Conflicting Interests

The authors declared no potential conflicts of interest with respect to the research,
authorship and/or publication of this article.

Funding
The authors received no financial support for the research, authorship and/or
publication of this article.

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