Kamrul Hassan PhD (Curtin, WA), AFHEA

In many parts of the world, and particularly in developed countries, populations are getting older. Of the baby boomers (born between 1945 and 1965), the oldest are now well into their sixties, and in their lifetimes fertility rates have fallen while life expectancies have climbed. For every four people aged between 15 and 64 in Europe, North America, Australia, New Zealand and Japan, there is now one person over 65. And this proportion is growing – by the end of the century, there will be two over-65s for every five people of working age. Population ageing will put significant pressure on the fiscal policies of governments around the world. Healthcare and pension systems are expected to bear the brunt, while ageing populations will shrink the labour force, putting downward pressure on economic productivity. But what if there’s an upside for the environment? My recent research has found that, in rich countries at least, ageing populations might help to drive down greenhouse gas emissions.

In Keynesian macroeconomics fiscal policy plays the dominant role to steer the economy along its long run equilibrium path and also to cure the short run deviation from its long run level. Present paper examines this role of government expenditure, a tool of fiscal policy, in the context of the economy of Bangladesh. The paper employs cointegration and Error Correction Mechanism (ECM) to examine the short and long run relationship between economic growth and government expenditure. Findings of the study indicate that, in the short run, government expenditure does not play any statistically significant role in eliminating the gap between actual and potential output. However, a statistically significant cointegrating relationship is found between government expenditure and long run equilibrium output

This paper examines whether financial development and openness to international trade can play any positive role in reducing poverty in Bangladesh through their growth enhancing effect. The paper takes granted that growth reduce poverty and makes econometric test to ascertain whether financial development and trade openness cause growth. Standard Granger-causality test is employed for this purpose. Variables are found first difference stationary without having any co-integrating relationship as reported by Johansen co-integration test. As such Granger-causality test is carried out in first difference VAR. The paper does not find any causal relationship between trade openness and growth, and financial development and growth. This implies that financial development and trade openness do not reduce poverty through their effect on growth. However, bi-directional causal link evidenced between financial development and trade openness indicates that these two can contribute to poverty reduction directly through their mutual effect on each other.

The impact of the growth of fiscal and monetary policy variables on nominal GDP growth is examined. Two measures on the fiscal policy side, government expenditure and total tax revenue, and on the monetary policy side, monetary aggregate measures M1 and M2, are selected as explanatory variables. Growth rate of M1 is found to have a statistically significant impact on nominal GDP growth. On the fiscal policy side, the growth rate of the tax revenue is found to have some lagged effect on nominal income. Government expenditure and M2 growth do not have any statistically significant impact on nominal GDP growth. With respect to the cumulative effect, M1 is found to be a statistically significant variable affecting nominal GDP growth. Co-integration analysis shows that there is a long-run equilibrium relationship between M1 and nominal GDP growth. The findings of the study support the monetarists’ claim that growth in money supply has a statistically significant impact on nominal income growth.