The Effect of Financial Leasing Threshold in the Financial Development and Economic Growth: Evidence from Albania

Abstract

Purpose: The main aim is to analyze the effect of the financial system in the economic growth and if the loan impact is conditioned or not by the financial leasing threshold. Approach/Methodology/Design: The proceeding data are time series of Albania's macroeconomic indicators, from 2008 to 2020 (quarterly frequency). The dependent variable is Gross Domestic Product, threshold variable is financial leasing, and the independent variables are business and individual loans from the banking system, the rate of private loans to domestic loans, monetary aggregate M2, deposits (with and without term) of the banking system. The statistical approach is based on the generalized method of moments for endogenous and exogenous variables in the threshold model. Findings: There is a financial leasing threshold level in which financial variables of bank loans and domestic loans are related to economic growth by changing the correlation direction. Practical Implications: the article demonstrated the empirical impacts that ought to be taken into consideration by the banking sector and financial leasing institutions to make decisions for further incentives in developing financial leasing. Originality/Value: The research provides empirical results encouraging further investigations on the subject matter.