THE IMPACT OF MONETARY, FISCAL AND FOREIGN TRADE POLICIES ON THE MISERY INDEX IN LOW- AND MIDDLE-INCOME COUNTRIES

Abstract

This study analyzes the impact of monetary, fiscal and foreign trade policies on the poverty index in 21 low- and middle-income countries using annual data for the period 2002-2019. These countries are Algeria, Bangladesh, Bhutan, Bolivia, Egypt, Eswatini, Haiti, Honduras, India, Indonesia, Kenya, Kyrgyzstan, Lesotho, Nicaragua, Nigeria, Philippines, Sri Lanka, Tanzania, Ukraine, Vanuatu, and Vietnam.  In the 1970s, inflation and unemployment reached high levels in many countries, especially in the US, and Arthur Okun used these two variables as an indicator of economic discontent by using their sum. This indicator is known as the Misery Index or the Discontent Index (Ekren et al. 2017: 5462).  Robert Barro (1999) developed the same index and added real GDP and long-term interest rates in addition to inflation and unemployment. The index was later modified by Hanke in 2011 and used bank lending rates instead of long-term interest rates (CATO, 2021). The misery index developed by Hanke is used in our study.