IMPACT OF MONETARY POLICIES ON ECONOMIC GROWTH: CASE OF MEXICO
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Universiti Malaysia Sarawak (UNIMAS)
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This study investigates the impact of Mexico's monetary policies on economic growth from 1960 to 2023, with a focus on Gross Domestic Product Growth Rate (GDPG) as the dependent variable. The analysis incorporates various independent variables, Money Supply (M1), Inflation Rates, Total Reserves, Foreign Direct Investment (FDI) and Trade. Employing a robust methodological framework, we utilize the Augmented Dickey-Fuller (ADF) test, Phillips-Perron (PP) test, Kwiatkowski-Phillips-Schmidt-Shin (KPSS) test, VAR lag length selection, Autoregressive Distributed Lag (ARDL), and diagnostic evaluations (Autocorrelation Test, Heteroskedasticity Test, Model Specification Test, Stability Test) aims to examine the stationarity, long-run associations, and causal interactions between the variables. These findings show that money supply significantly boosts economic growth, while inflation negatively affects it in both the short and long run. The error correction term is significant and negative (-1.6257), indicating a rapid return to equilibrium. Diagnostic tests confirm no issues with autocorrelation, heteroskedasticity, or model misspecification.