Economic Growth Dynamics in Emerging Economies: The Impact of Monetary Policy, Oil Price Shocks, and Capital Flows - Evidence from Panel Data Models

Abstract

This study examines the effects of monetary policy, foreign direct investment (FDI), oil prices, and international reserves on economic growth in selected emerging economies. The analysis uses annual panel data for eight countries (Turkey, Egypt, Mexico, Algeria, Indonesia, Malaysia, Brazil, and South Africa) over 2000–2024. The empirical strategy applies the Pooled Mean Group Autoregressive Distributed Lag (PMG-ARDL) model and a Panel Error Correction Model (ECM). Results confirm a long-run equilibrium relationship among variables. In the long run, FDI, oil prices, and international reserves positively affect growth, while monetary expansion has a negative effect. Inflation is insignificant. Short-run results indicate rapid adjustment toward equilibrium with heterogeneous country responses. Granger causality shows unidirectional causality from money supply to growth and linkages between oil prices and liquidity. The findings highlight that sustainable growth requires coordinated macroeconomic policies, effective monetary transmission, and stronger external stability.