Economic Policies and Their Impacts on Growth

Macroprudential policies have been used by many countries to ensure the stability of their financial systems and, in return, the stability of their economic conditions. Because the major aim of macroprudential policies is to stabilize financial markets and prevent possible serious financial problems in the future, the literature has mostly focused on the link between macroprudential and monetary policies, ignoring the importance of fiscal policies in this process. However, fiscal policies can also help financial stabilization but indirectly. Therefore, the interaction among these groups of economic policies is expected to be crucial to achieve smooth economic development. This paper empirically investigates the relationship between the direction of economic policies and their impacts on growth. The dataset covers the years between 1990 and 2018 and includes 135 advanced and developing countries. The findings show that macroprudential policies are more effective in terms of improving economic performance of countries when supported with other economic policies. The results imply that macroprudential policies can be sometimes more beneficial when they are introduced in a way to counterbalance the possible negative effects of monetary and fiscal policies.