The objective of this study is to examine the role of monetary policy in creation of new business entities and enhancement of external trade. The effectiveness of interest rate, banks’ credit to private sector and other explanatory variables have been tested through a statistical model based on two simultaneous equations estimated by 20 years’ data of 105 countries. This study provides a guideline for the policy makers to assess the strength of credit to private sector. It explores some important and interesting relations among the creation of new business entities, volume of external trade, lending interest rate and credit to private sector. It was further revealed that foreign direct investment complements the externals trade. The quantification of the impacts of different modes of investment financing on business activities add s some new dimensions to economic literature. For policy makers, it identifies the transformation mechanism of monetary policy for enhancement in the business activities.
KeywordsCredit to Private SectorExternal TradeFixed Effect ModelInitial Public Of-feringMonetary PolicyNew Business DensityPanel Least SquareQuantitative Easing
Al-Mawsheki, R. M. S. A. (2022). Effect of Working Capital Policies on Firms’ Financial Performance. Cogent Economics & Finance, 10, Article ID: 2087289. https://doi.org/10.1080/23322039.2022.2087289
Ayenew, B. B. (2022). The Impact of Foreign Financial Inflows on the Economic Growth of Sub-Saharan African Countries: An Empirical Approach. Cogent Economics & Finance, 10, Article ID: 2123888. https://doi.org/10.1080/23322039.2022.2123888
Case, A., & Deaton, A. (2020). Deaths of Despair and the Future of Capitalism. Princeton University Press. https://doi.org/10.1515/9780691199955
Darjana, D., Wiryono, S. K., & Koesrindartoto, D. P. (2022). The COVID-19 Pandemic Impact on Banking Sector. Asian Economics Letters, 3, 1-6. https://doi.org/10.46557/001c.29955
Dimand, R. (1988). The Origins of the Keynesian Revolution: Evolution of Keynes’s ideas. Edward Elgar Publishing.
Duong, K. D., Tran, M. M., Van Nguyen, D., & Le, H. T. P. (2022). How Fears Index and Liquidity Affect Returns of Ivol Puzzle before and during the Covid-19 Pandemic. Cogent Economics & Finance, 10, Article ID: 2114175. https://doi.org/10.1080/23322039.2022.2114175
Durrani, A., Rosmin, M., & Volz, U. (2020). The Role of Central Banks in Scaling Up Sustainable Finance—What Do Monetary Authorities in the Asia-Pacific Region Think? Journal of Sustainable Finance and Investment, 10, 92-112. https://doi.org/10.1080/20430795.2020.1715095
Gordon, R. J. (1990). What Is New-Keynesian Economics? Journal of Economic Literature, 28, 1115-1171.
Griffith, E. (2014). Why Startups Fail, According to Their Founders. Fortune, September 25, 2014, 10-27.
Gunderson, G. (2020). How to Prepare for the Greatest Wealth Transfer in History. Forbes.
Hicks, J. (1967). Critical Essays in Monetary Theory. OUP.
Inderst (2018). Infrastructure Investment, Private Finance, and Institutional Investors: Asia from a Global Perspective’ in Financing Infrastructure in Asia and the Pacific Capturing Impacts and New Sources. Asian Development Bank Institute.
International Monetary Fund (2020a). The Great Lockdown, International Monetary Fund: World Economic Outlook. International Monetary Fund.
International Monetary Fund (2020b). World Economic Outlook Update. International Monetary Fund.
Keynes, J. M. (1936). The General Theory of Employment, Interest and Money. Palgrave Macmillan.
Kindleberger, C. P. (1970). Power and Money: The Economics of International Politics and the Politics of International Economics. Basic Books Inc.
Konno, Y. (2022). Research on Performance Forecasting Bias in Start-Up Companies. Cogent Economics & Finance, 10, Article ID: 2118680. https://doi.org/10.1080/23322039.2022.2118680
Krugman, P. (2020). Notes on the Coronavirus: The Economic Equivalent of a Medically Induced Coma. The New York Times, April 1, 2020.
Mansour, M., Hashim, H. A., Salleh, Z., Al-ahdal, W. M., Almaqtari, F. A., & Qamhan, M. A. (2022). Governance Practices and Corporate Performance: Assessing the Competence of Principal-Based Guidelines. Cogent Business & Management, 9, Article ID: 2105570. https://doi.org/10.1080/23311975.2022.2105570
Mehar, A. (2001). Stock Market Consequences of Macro Economic Fundamentals. Pakistan Business Review, 3, 3-13.
Mehar, A. (2005). Is Debt a Substitute of Equity? Relevancy of Financial Policy in Current Economic Scenarios. Applied Financial Economics, 15, 337-366. https://doi.org/10.1080/0960310042000314188
Mehar, A. (2018a). Impact of Monetary Policy on Growth and Poverty: Drastic Consequences of Government Intervention. Journal of Modern Economy, 1, 1.
Mehar, A. (2018b). Populism versus IMF Conditionalities: Demand Management Policies in Present Regime of Globalization. Management and Economics Research Journal, 4, 1-18. https://doi.org/10.18639/MERJ.2018.04.522228
Mehar, A. (2021a). Bridge Financing during Covid-19 Pandemics: Nexus of FDI, External Borrowing and Fiscal Policy. Transnational Corporation Review, 13, 109-124. https://doi.org/10.1080/19186444.2020.1866377
Mehar, M. A. (2021b). Magnitude of Investment and Global Value Chain: A Case Study of Textile and Clothing Industry of Pakistan. The Journal of the Textile Institute, 113, 191-198. https://doi.org/10.1080/00405000.2020.1868138
Montecino, J. A., & Epstein, G. (2015). Did Quantitative Easing Increase Income Inequality? Working Paper No. 28, Institute of New Economic Thinking. https://doi.org/10.2139/ssrn.2692637
Narayan, P. K., & Juhro, S. M. (2022). Stimulating Economic Recovery, Promoting Sustainable-Inclusive Growth: Challenges and Opportunities. Bulletin of Monetary Economics and Banking, 25, 61-84. https://doi.org/10.21098/bemp.v25i0.2057
Nemoto, N., & Morgan, P. J. (2020). Environmental, Social, and Governance Investment: Opportunities and Risks for Asia. ADBI.
Nguyen, K. Q. T. (2022). Does Leverage Fit Non-Performing Loans in the COVID-19 Pandemic—Evidence from the Vietnamese Banking System. Cogent Business & Management, 9, Article ID: 2119675. https://doi.org/10.1080/23311975.2022.2119675
Rogoff, K. (2020). The COVID-19 Recession Could Be Far Worse than 2008. World Economic Forum.
Shirai, S. (2020). Growing Central Bank Challenges in the World and Japan: Low Inflation, Monetary Policy, and Digital Currency. ADBI.
Skidelsky, R. (2020). What’s Wrong with Economics: A Primer for the Perplexed. Yale University Press. https://doi.org/10.12987/9780300252767
Stein, J. L. (1982). Monetarist, Keynesian & New Classical Economics. Blackwell.
Tarawalie, A., & Kpana, K. (2022). Monetary Policy, Exchange Rate Fluctuations and Trade Balance: The Sierra Leone Experience. Modern Economy, 13, 425-441. https://doi.org/10.4236/me.2022.133023
The Economist (2020a). Government Finances: After the Disease, the Debt. The Economist, 23rd April 2020.
Wang, G. Z., & Hausken, K. (2022). A Game between Central Banks and Households Involving Central Bank Digital Currencies, Other Digital Currencies and Negative Interest Rates. Cogent Economics & Finance, 10, Article ID: 2114178. https://doi.org/10.1080/23322039.2022.2114178
Wang, Y., Chang, X. Y., & Wang, S. S. (2022). Are Government Directors a Blessing for Actual Performance or Overvalued by the Market? Evidence from China. Cogent Business & Management, 9, Article ID: 2116799. https://doi.org/10.1080/23311975.2022.2116799
World Bank (2019). World Development Indicators. World Bank Group.
World Bank (2022). World Development Indicators. World Bank Group.