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The Credit–Growth Nexus: New Evidence from Developing and Developed Countries

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  • Sassi Seifallah
  • Ben Ali Mohamed Sami

Abstract

type="main"> The purpose of this paper is to assess the relationship between credit market development and economic growth for a heterogeneous panel of 20 developing and developed countries with varied growth experiences. The empirical study is based on estimations of generalized method of moments (GMM) and pooled mean group (PMG) on heterogeneous panel data model. Difference GMM estimation indicates that credit market development has a negative effect on economic growth. This result is robust for our full sample and for the subsample of non-OECD countries, but not for the subsample of OECD countries. However, using a PMG model, we provide evidence of a positive impact in the long run between credit market development and economic growth. When considering heterogeneity in the short-run relationship across countries, our findings suggest that the credit–growth relationship is specific across countries, depending on each country-specific legal and macroeconomic environment.

Suggested Citation

  • Sassi Seifallah & Ben Ali Mohamed Sami, 2014. "The Credit–Growth Nexus: New Evidence from Developing and Developed Countries," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 43(2), pages 115-135, July.
    • Handle: RePEc:bla:ecnote:v:43:y:2014:i:2:p:115-135
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    Cited by:

    1. Gautam Negi & Himanshu Mishra, 2023. "Bank Credit And Sectoral Growth €“ Evidence From Indian States," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 31, pages 65-84, June.
    2. Ali M. Kutan & Nahla Samargandi & Kazi Sohag, 2017. "Does Institutional Quality Matter for Financial Development and Growth? Further Evidence from MENA Countries," Australian Economic Papers, Wiley Blackwell, vol. 56(3), pages 228-248, September.
    3. Ben Ali, Mohamed Sami & Fhima, Fredj & Nouira, Ridha, 2020. "How does corruption undermine banking stability? A threshold nonlinear framework," Journal of Behavioral and Experimental Finance, Elsevier, vol. 27(C).

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