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Analyzing the Impact of Fiscal and Monetary Policies on Income Distribution in Central Asian Economies

Author

Listed:
  • Muhammad Azam

    (Department of Economics, Faculty of Business & Economics, Abdul Wali Khan University Mardan, Khyber Pakhtunkhwa, Pakistan)

  • Zulfiqar Khan

    (Faculty of Business and Economics, Abdul Wali Khan University Mardan, Khyber Pakhtunkhwa, Pakistan)

  • Yusnidah Ibrahim

    (School of Business and Social Science, Albukhary International University, Alor Setar, Kedah. Malaysia)

Abstract

This study examines the impacts of macroeconomic policies (i.e. fiscal policy through government consumption spending and total tax revenue, and monetary policy through broad money and real interest rate) along with other regressors such as inflation, Gross Domestic Product (GDP) per capita, remittances, exchange rate, and financial development on income distribution in four Central Asian countries from 1995 to 2020. After conducting unit root tests, the Autoregressive Distributed Lag (ARDL)/Pooled Mean Group (PMG) approach was implemented for empirical analysis. The results show that both fiscal and monetary policies have positive and negative effects on income inequality. Moreover, inflation is found to increase income inequality, while financial development, higher levels of per capita income, and foreign remittances decrease inequality in the panel and individual country analyses. These findings suggest that coordinated policies, along with increased remittances and financial sector development, are needed to reduce income inequality.

Suggested Citation

  • Muhammad Azam & Zulfiqar Khan & Yusnidah Ibrahim, 2024. "Analyzing the Impact of Fiscal and Monetary Policies on Income Distribution in Central Asian Economies," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 13(3), pages 109-140.
    • Handle: RePEc:cbk:journl:v:13:y:2024:i:3:p:109-140
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    More about this item

    Keywords

    Fiscal policy; monetary policy; income distribution; ARDL/PMG; Central Asia.;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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