Domestic Credit Research Articles

The Impact of Credit Policy Environment on Agricultural Output in Nigeria

The growth of the agriculture sector is a key factor in the survival of the Nigerian economy. However, the production and productivity of this sector have been lower than expected recently. The country is now a net importer of some crops that were previously produced in large quantities. Hence, with the aim to identify factors that influence the sector, the study specifically establishes the relationship between the agricultural sector growth proxy by the agricultural production index and the credit policy variables in Nigeria. The research utilized the flexible autoregressive distributed lag (ARDL) approach to determine the presence of co-integration. The estimated long-run and short-run models demonstrated the best, most efficient, and unbiasedness qualities. The findings revealed that loans from commercial banks and the Agricultural Credit Guarantee Scheme Fund (ACGSF) have a significant positive impact on the agricultural sector's growth in the long run. Conversely, the long-run agricultural growth exhibited a negative relationship with the domestic credit to the private sector and lending interest rate. This finding underscores the importance of boosting commercial bank loans to the agricultural sector and increasing credit volume from the Agricultural Credit Guarantee Scheme Fund. Furthermore, it highlights the necessity of introducing more financial incentives to attract domestic private investments and lowering the lending interest rate on agricultural credit within the country.

The Role of the Banking System in National Economy: Empirical Evidence from Romania

The aim of this paper is to investigate the role of banking system in Romanian economy, in 2008-2023 period, focusing on the interlinkages between bank deposit, bank credit and interest rates. Additionally, this paper analyzes the financial intermediation of banking system (measured by domestic credit to private sector by banks as % of GDP) in Romanian economy and its contribution to economic growth and development.

Fueling economies through credit and industrial activities. A way of financing sustainable economic development in Brazil

<p>As an emerging country preoccupied with preserving its resources for the future, Brazil aims to find the right balance between economic advancement and sustainability goals. In this context, we tackled the link between sustainable economic development and macroeconomic indicators related to domestic credit granted to the private sector, CO<sub>2</sub> emissions from industries, and annual inflation rate. By means of time series data analysis run for the period 1996‒2022 via three estimation methods (i.e., least squares, fully modified least squares, dynamic least squares), we found that annual GDP growth rate, control of corruption, and rule of law (as proxies for sustainable economic development) are significantly impacted by GDP growth rate and emissions. Therefore, access to financial resources and intensive industrial activities yielding emissions trigger economic growth, tend to strengthen control of corruption and the rule of law. Additionally, policy implications and future research directions are addressed.</p>

ANALYZING THE DYNAMIC RELATIONSHIPS BETWEEN MACROECONOMIC VARIABLES AND GDP GROWTH IN ALBANIA: A PANEL DATA APPROACH

This study examines the impact of various macroeconomic factors on GDP growth in Albania during the period 1997-2023. Using a panel data approach, the analysis investigates the relationship between GDP growth and variables such as trade openness, inflation, government expenditure, domestic credit, population growth, final consumption expenditure, gross fixed capital formation, and the current account balance. The results indicate that government expenditure and trade openness are statistically significant determinants of GDP growth. Granger causality tests reveal that domestic credit and government expenditure Granger-cause the current account balance, while domestic credit and trade openness Granger-cause GDP growth. The findings suggest that policies aimed at increasing government spending and promoting trade integration can positively impact economic growth in Albania. However, further research is needed to explore the long-term effects of these variables and to address potential limitations of the study.

Innovation-led Governance for Economic Development of Bangladesh

A strategic approach to public sector governance, innovation-led governance entails incorporating innovation into larger governance frameworks. Governments can boost innovation in a number of ways, such as investing in new technology or talents, using innovative approaches to governing, and modifying current procedures. Because it enables the conversion of scientific and technological advancements into profitable economic activity, innovation is a critical component of economic progress. This study is developed to examine the relationship between innovation and the economic development of Bangladesh. Financial Innovation, Trade Openness, Human Development Capital, Gross Capital Formation, and Domestic Credit to Private have been taken as an indicator of innovation measure where GDP measures the country’s economic development. Financial Innovation, Trade Openness, Human Development Capital, Gross Capital Formation, and Domestic Credit to Private have been considered independent variables, and GDP as a dependent variable. This study used secondary data for analysis purposes. Secondary data has been collected from different websites (World Bank, World Bank Development Indicators, Bangladesh Bank, Bangladesh Bureau of Statistics). Several tests (Unit root test, Johansen Co-integrating test, Vector Error Correction Model, Impulse Response Function, ARDL, Bound test) are employed for secondary data analysis. All the variables are non-stationary at the level and stationary at the first difference. i.e., I (1). Johansen co-integrating test found that there is a long-term significant relationship between the dependent variable and independent variable. Further, the VECM and impulse response function (innovation accounting) calculate the Speed of Adjustment and find a short-term shock related to GDP. ARDL test and bound test showed that Trade Openness (TO), Human Development Capital (HD), and Gross Capital Formation (GCF) are positively correlated with GDP and negatively correlated with Financial Innovation and Domestic Credit to the Private Sector in the long run. To encourage technical innovation in domestic small enterprises, the Government- led Innovation initiatives (GIPs) are extremely competitive initiatives that give small businesses the chance to participate in Federal Research/Research and Development (R/R&D) with the possibility of commercialization. So, the Government should pay more attention to fostering economic development.

The impact of monetary and fiscal regulatory policies on the balance of payments: A case study from the emerging market

This study investigates the impact of monetary and fiscal policies on the balance of payments (BoP) in Jordan. Through a robust econometric model, it explores the influence of key independent variables such as domestic credit, money supply, consumer price index, government expenditure, and tax revenue. Unit root test and co-integration (bound) test are employed to ensure methodological credibility. The analysis reveals significant relationships between these variables and the BoP-to-GDP (gross domestic product) ratio. Notably, domestic credit to GDP exhibits a significant positive relationship, while money supply to GDP has a substantial negative impact. Government expenditure to GDP shows a positive influence, whereas tax revenue to GDP lacks statistical significance. The consumer price index demonstrates a significant negative influence. Dummy variables representing the financial crisis and Arab Spring exhibit significant negative impacts. The model explains 65.26% of the variation in the BoP/GDP relationship. Additional diagnostic tests confirm the model’s robustness. This research offers valuable insights for policymakers aiming to enhance Jordan’s external sector stability and resilience.

The role of monetary policy in moderating the effect of international trade price on economic performance in non-WAEMU countries

PurposeThe present study complements the extant studies by empirically assessing the relevance of monetary policy in moderating the effect of oil price and terms of trade (TOT) on economic performance in non-WAEMU countries for the period 2000–2021.Design/methodology/approachMonetary policy is proxied by real interest rate (RIR), real effective exchange rate (REER) and bank credit while economic performance is understood in terms of real output, unemployment and inflation. The adopted empirical strategy is interactive fixed effects regressions.FindingsThe following main findings are established. First, RIR can be used to effectively moderate oil price and TOT in order to positively influence real output and the maximum or avoidable RIR policy thresholds are above policy range. Second, REER can be used to effectively moderate TOT for an overall positive effect on real output and the maximum or avoidable REER threshold of 150.142 REER index is within policy range. Third, bank credit does not effectively moderate the channels (i.e. oil price and TOT) for a significant incidence on real output. Fourth, only bank credit effectively moderates oil price for an overall negative effect on unemployment. However, for this to be possible, bank credit must exceed the threshold of 11.000 of private domestic credit (% GDP). Fifth, only REER effectively moderates TOT for a negative effect on inflation. However, the corresponding policy threshold is above the REER index policy range and hence, cannot be used by policy makers because it does not make economic/statistical sense. Policy implications are discussed.Originality/valueThis study extends the extant literature on potential monetary unions by assessing how monetary policy can be employed in order to moderate the manner in which international trade prices influence economic performance.

TIME SERIES ANALYSIS ON CREDIT DEFAULT SWAP (CDS) AND MARKET INDICATORS: THE CASE OF TÜRKİYE

Regional and global cyclical fluctuations in the world economy reveal the importance of the CDS premium for developing countries such as Turkey, which has fragile macroeconomic indicators and is dependent on international funds. This study deals with the influence of some economic indicators on CDS premiums with a focus on Turkey in the period from January 2010 to March 2022. This study attempts to contribute to the literature by providing evidence from a developing country perspective and by improving the existing knowledge with recent and monthly data. The study determines possible long-run and short-run relationships between CDS premiums, and the exchange rate ($/TL), interest rates (applied to consumer loans in TL), Istanbul Stock Exchange 100 indexes, official reserves ($1,000,000), and total domestic credit volume ($) using the ARDL method and possible directions of causality using the Granger test. The general results have provided strong evidence that the exchange rate and credit volume have positive cointegration on CDS premiums, while official reserves and stock market index have a negative cointegration on CDS premiums.

Financial soundness and subjective financial well-being: Do government policies matter?

Does government policy intervention enhance citizens’ financial well-being, particularly when considering the increased financial soundness attributed to the private sector? This study empirically addresses this question, using data from more than 200,000 individuals worldwide. To provide causal evidence, we employ a two-stage least squares (2SLS) ­approach with a high-dimensional fixed-effect estimator, which captures multiple levels of control and addresses endogeneity concerns. Our findings suggest that (i) improvements in financial soundness — proxied by domestic credit development — significantly ­increase financial satisfaction, whereas (ii) surprisingly, government interventions, whether in the form of policies tightening or loosening, tend to erode this positive effect. This outcome may reflect either (i) ineffective interventions or (ii) the government ­serving as a scapegoat for a decline in subjective financial well-being. Our findings imply that to optimize public satisfaction, governments should approach interventions in the private sector with caution, thereby strengthening government legitimacy.

Exploring the Linkage between Financial Development and Ecological Footprint in Egypt: Evidence from AVECM Analysis

This study examines the dynamic relationship between financial development and environmental sustainability in Egypt using a Vector Error Correction Model (VECM) and Granger causality tests. The research focuses on key indicators of financial development, namely Domestic Credit to the Private Sector (DCPS) and Foreign Direct Investment (FDI), and their impact on CO2 emissions. The VECM results highlight a long-term equilibrium relationship, where both FDI and DCPS have significant impacts on CO2 emissions, reflecting the environmental implications of financial growth. Specifically, FDI is associated with increased environmental degradation, while the effect of DCPS is positive but less pronounced. The Granger causality test reveals a bidirectional causal relationship between DCPS and CO2 emissions, indicating interdependence between financial development and environmental degradation. Furthermore, there is evidence of unidirectional causality from CO2 emissions to FDI, suggesting that environmental conditions may influence foreign investment decisions. These findings underscore the importance of implementing sustainable financial policies to mitigate the environmental impact of financial development in Egypt.

THE EFFECT OF FINANCIAL DEVELOPMENT ON RENEWABLE ENERGY CONSUMPTION IN CAMEROON

The improvement of the energy structure and the development of the renewable energy sector play an important and strategic role in Cameroon's responsibilities against climate change. So, the authorities and policy makers have made great efforts to achieve this. But one of the main constraints of Cameroon's energy transition lies in financial issues, which are inevitably linked to the country's financial development. At the heart of this reflection therefore arises the question of knowing: What could be the impact of financial development on the consumption of renewable energies in Cameroon? This study therefore aims to examine the impact of financial development on the consumption of renewable energies in Cameroon over the period from 2000 to 2022. Our research is based on a Vector Autoregressive (VAR) model; seven variables of financial development have been used to explain the consumption of renewable energies in Cameroon. The results of the empirical analysis show that foreign direct investments, the evolution of bond markets and energy prices represented by the consumer price have a negative effect on the consumption of renewable energies. On the other hand, domestic credit provided by the financial sector, banking availability, economic development, and income have a positive impact on renewable energy consumption. Our empirical results provide valuable insights into thebest ways to deploy capital in the renewable energy sector, in order to provide customers with cost-competitive options, andto facilitate the implementation of policies that contribute to environmental sustainability and energy security. Keywords: financial development, renewable energies, VAR model, Cameroon

ANALISIS FAKTOR-FAKTOR YANG MEMENGARUHI PENYALURAN KREDIT DOMESTIK PADA ASEAN COUNTRIES

This research aims to analyze the determinants of interest rates, profit tax, total debt service, gross domestic product (GDP), and time to resolve insolvency on domestic credit by banks in ASEAN countries. This research is descriptive quantitative research using secondary data obtained from the World Bank website in 2013-2022 by taking a sample of ASEAN countries namely Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam, and Brunei Darussalam. The analysis used in this research is the panel data regression method. This research is expected to contribute to government policy, namely improving credit quality in Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam, and Brunei Darussalam. The result show that time to resolve insolvency is significant to domestic credit to private sector by banks, while nominal interest rates, profit tax, total debt service, and gross domestic product have no significant effect.

Exogenous Variables and their Influence on Domestic Credit Provision in Nigeria: Evidence from Quantile Regression

Abstract The relevance of domestic credit to an economy has spurred interest in studies that seek to examine the factors that determine it. In this study, the focus is to evaluate the role of exogenous factors in influencing domestic credit provision in Nigeria. The study used a monthly dataset that covered the period from 2007M12 to 2024M5 under the framework of quantile regression. The findings of the study reveal that oil price had a positive and significant impact on domestic credit provision at all the quantiles, while world interest rate had a negative and significant impact on domestic credit provision at the 25th quintile. The exchange rate and bank reserves exerted a positive and significant impact on domestic credit provision at all the quantiles, while the impact of the Treasury bills rate was positive and significant only at the 25th and 50th quantiles. The study suggests that, in regulating credit provision in Nigeria, monetary authorities should closely monitor these exogenous variables as well as exchange rate movement.

Impact of Domestic Investment on Domestic Credit Level. Does Institutional Quality Matter?

Impact of Domestic Investment on Domestic Credit Level. Does Institutional Quality Matter?

Effect of per Capita Income, GDP Growth, FDI, Sectoral Composition, and Domestic Credit on Employment Patterns in GCC Countries: GMM and OLS Approaches

This paper examines the impact of per capita income, gross domestic product (GDP) growth, foreign direct investment (FDI), sectoral composition, and domestic credit on employment patterns in the Gulf Cooperation Council (GCC) countries from 2013 to 2023, based on “Okun’s law”. The dynamic data panel was analyzed using the generalized method of moments (GMM) and the ordinary least square (OLS) method. The research findings reveal that the agricultural sector’s contributions have significantly influenced the employment patterns in GCC countries, emphasizing the traditional role of agriculture in creating job opportunities. However, the contribution of the services and industrial sectors has no significant impact on employment patterns. Domestic credit and FDI inflows have significantly influenced employment patterns in GCC countries, underscoring their vital role in sustaining long-term economic stability. Per capita income and GDP growth did not significantly impact the employment pattern in the GCC countries during the study period. This research provides valuable insights to policymakers, highlighting the need to focus on the services and industrial sectors to promote their contribution to employment in GCC countries. The research findings also augment the literature by identifying the key economic indicators contributing to GCC countries’ employment creation.

Macroeconomic volatility and terrorism incidents in Africa

AbstractThis article investigates the impact of macroeconomic volatility on terrorism in 38 African economies spanning the period from 1980 to 2012, using available data. It examines four categories of terrorism markers: domestic, transnational, uncertain, and total, and their correlation with the volatility of four macroeconomic indicators—inflation, output growth, domestic credit to the private sector, and government expenditures. The study employs the negative binomial regression estimator on both the conditional variance structures of the generalized autoregressive conditional heteroskedasticity (GARCH) and exponential GARCH (EGARCH) and the unconditional measure of a 3‐year interval time varying of measuring macroeconomic variables' volatilities on other regressors. I find, first, that inflation volatility is a significant predictor of all terrorism markers, except for transnational terrorism. This implies that high inflation volatility is linked to increased domestic terrorism. Second, the role of domestic credit to the private sector in mitigating transnational terrorist activities highlights the importance of stable private sector access to credit in reducing such incidents. Third, government consumption expenditure volatility has a dual effect on terrorism: it amplifies domestic terrorism but serves as a mitigating factor for total terrorism. This indicates that stable government expenditure can reduce overall terrorism, but might increase domestic terrorism. Last, other variables—such as population, ethnicity, conflicts, surface areas, and lagged terrorism values—are also found to influence the examined terrorism measures. For robustness, I employ alternative statistical techniques, including Poisson Pseudo‐maximum likelihood (PPML) estimation with multiple high‐dimensional fixed effects (HDFE). In summary, this study emphasizes the critical role of addressing inflation volatility in macroeconomic policies as a primary measure to counter terrorism. Stable economic conditions, particularly in relation to inflation, can significantly contribute to reducing terrorism in African economies.

Financial inclusion, financial stability, and poverty reduction in Africa

AbstractFinancial inclusion universally remains one of the critical means to end poverty in the world, especially Africa, where the level of poverty is high. It has however been argued that financial inclusion equally has the tendency to destabilize the financial system, thwarting the poverty reduction efforts, which necessitates the interrogation of the relationship between the variables. This study therefore investigates how financial stability mediates the financial inclusion and poverty reduction relationship in Africa. Using the panel Autoregressive Distributive Lag model, covering a period of 2004–2020, the study found that financial inclusion is positively related to financial stability in both short and long‐run, with education, Gross National Income per capita (GNI) and domestic credit to private sector, contributing to financial stability, and trade openness negatively related to financial stability in the long‐run. The study further established that financial stability is positively related to household consumption expenditure as such leads to poverty reduction with trade openness, government expenditure, GNI, education, domestic credit to private sector, and institutional quality contributing significantly to poverty reduction. This confirms the mediating role financial stability plays in enhancing the impact of financial inclusion on poverty reduction in Africa and must therefore be given the necessary attention, through proper regulatory mechanisms.

Exploring the impact of industrialization and electricity use on carbon emissions: The role of green FinTech in Asian countries using an asymmetric panel quantile ARDL approach

PurposeThe purpose of this study is to investigate how industrialization, financial development, electricity consumption, trade openness, and green FinTech affect on carbon emissions asymmetrically in Asian countries. DesignMethod/Approach: The study examined 29 years of panel data from 39 Asian countries from 1995 to 2022, sourced from World Development Indicators (WDI) and the International Monetary Fund (IMF). The study constructs a green financial technology index using principal component analysis (PCA). The study utilizes an Asymmetric Panel Quantile Autoregressive Distributive Lag (A-QARDL) model with pooled mean group (PMG) specifications to explore effects that exhibit cross-sectional homogeneous in the long-run, but heterogeneous in the short-run effects. FindingsIndustrialization and financial development have a strongly asymmetric impact on carbon emissions. Industrialization causes an increase in carbon emissions at various quantiles, while green FinTech plays a crucial role in mitigating these carbon emissions. Trade openness and domestic credit to the private sector also help reduce carbon emissions. Research limitations and implicationsThe study emphasizes the significance of employing green FinTech techniques and using renewable energy sources to meet sustainable industrialization and sustainability goals in Asian countries. The policy consequences include promoting environmentally friendly industrial practices, encouraging green financial investments, and boosting government financing for private sector research and development to mitigate carbon emissions. Originality/valueThe study employs robust modeling to analyze the role of green FinTech to enhance industrial sustainability. Both Industrialization and deindustrialization have an impact on economic emissions, and the potential of green FinTech's to promote sustainability contributes to the environment protection strategy.

Inclusive finance and sustainability: The dynamic spillover effects of uncertainties on access to credit

A firm's access to domestic credit is crucial in inclusive finance for businesses, particularly small and medium-sized enterprises, to invest and grow. Sustainable and inclusive economic growth requires a healthy private sector with access to financial resources. This paper explores how uncertainty from major economies (measured by Uncertainty Spillover indices) can limit domestic credit availability in the private sector. Analysing a panel dataset encompassing 100 developed and developing economies from 1996 to 2019, the research reveals that uncertainties stemming from China and the United States significantly reduce the availability of domestic financial resources. Uncertainties surrounding other G7 economies (Canada, France, Germany, Italy, Japan, and the United Kingdom) also exhibit a negative association; however, their effects are statistically insignificant. The robustness of these findings is confirmed across various empirical models and income classifications. Possible implications for inclusive finance and sustainable economic growth are also discussed.

Testing technological Kuznets curve implications on achieving sustainable development goal 10 in seven Asian countries

This study investigates the relationship between technological innovations, financial development, and income inequality implications on achieving Sustainable Development Goal 10 (SDG10) in seven Asian economies via testing the inverted U-shaped hypothesis of technological innovation on income inequality in the concept of technological Kuznets curve hypothesis. The significant contribution of this study is introducing the Technological Kuznets Curve (TKC) as an extension to the Kuznets curve (KC) framework to capture the impact of technological innovation on income inequality. The PMG/ARDL was applied to estimate the coefficients to accomplish the study's objective. The panel cointegration tests confirm that all variables are cointegrated with income inequality. The empirical findings validate the KC hypothesis and demonstrate that technological innovations contribute to reducing income inequality within the Kuznets curve framework in the long run. Financial development (money supply) was negatively correlated with income inequality. The study further validates the TKC hypothesis, revealing an inverted U-shaped relationship between technological innovations and income inequality. Financial development, measured by domestic credit to the private sector, also shows a negative correlation with income inequality within the TKC framework. However, the money supply demonstrates a positive link with income inequality. The study recommended the necessity to prioritize policies that support technological innovation through subsidies, encouragement for research and development, and collaborations between the public and private sectors will greatly lower income inequality and support achieving Sustainable Development Goal 10 (SDG10). Financial development significantly facilitates access to financial services and contributes to diminishing income inequality by building an effective and inclusive banking system (mobile banking services for poor communities), easing access to credit for emerging and small and midsize enterprises (SMEs), and money circulation. Governments should strategically allocate resources toward programs and initiatives that directly address income inequality and promote inclusive growth.