Author(s)

Muhammad Ayub Mehar^1*, Mamdouh Abdulaziz Saleh Al-Faryan^2,3

¹Department of Business Administration, Iqra University, Karachi, Pakistan.
²School of Accounting, Economics and Finance, Faculty of Business and Law, University of Portsmouth, Portsmouth, UK.
³Consultant in Economics and Finance, Riyadh, Saudi Arabia.

The objective of this study is to examine the role of monetary policy in creation of new business entities and enhancement of external trade. The effectiveness of interest rate, banks’ credit to private sector and other explanatory variables have been tested through a statistical model based on two simultaneous equations estimated by 20 years’ data of 105 countries. This study provides a guideline for the policy makers to assess the strength of credit to private sector. It explores some important and interesting relations among the creation of new business entities, volume of external trade, lending interest rate and credit to private sector. It was further revealed that foreign direct investment complements the externals trade. The quantification of the impacts of different modes of investment financing on business activities adds some new dimensions to economic literature. For policy makers, it identifies the transformation mechanism of monetary policy for enhancement in the business activities.

Credit to Private Sector, External Trade, Fixed Effect Model, Initial Public Of-fering, Monetary Policy, New Business Density, Panel Least Square, Quantitative Easing

Mehar, M. and Al-Faryan, M. (2022) Effects of Monetary Policy on Business Startups and Trade Activities: Global Empirical Evidences. Theoretical Economics Letters, 12, 1825-1844. doi: 10.4236/tel.2022.126098.