IDEAS home Printed from https://ideas.repec.org/a/ris/qjatoe/0307.html
   My bibliography  Save this article

Investigating the Causal Relationship Between Bank Credits and Economic Growth: Markov Switching Nonlinear Granger Causality Approach

Author

Listed:
  • Sajadi, Somayeh Sadat

    (PhD Student, Department of Economics, Faculty of Economics and Accounting, Tehran Branch, Islamic Azad University)

  • Khosravinejad, Aliakbar

    (Assistant Professor, Department of Economics, Faculty of Economics and Accounting, Central Tehran Branch, Islamic Azad University)

  • Momeni Vesalian, Houshang

    (Assistant Professor, Department of Economics, Faculty of Economics and Accounting, Central Tehran Branch, Islamic Azad University)

  • Emamverdi, Ghodratollah

    (Assistant Professor, Department of Economics, Faculty of Economics and Accounting, Central Tehran Branch, Islamic Azad University)

Abstract

The relationship between credit and economic growth is one of the issues discussed by economists and recent studies have shown that the relationship between credit and economic growth can be nonlinear. The aim of this study was to investigate the nonlinear Granger causality between the credit variable (which is the most important criterion for financial development) and the economic growth variable. For this purpose, Granger causality in the form of MSVAR model and seasonal data in the period 1383: 1 to 1398: 4 have been used. The results show a nonlinear relationship between economic growth and validity and MSVAR model has better explanatory power than its linear competitor (VAR model). According to this study, in regime one (which corresponds to periods of positive economic growth and high credit growth), causality exists only in terms of economic growth to credit, and in regime two (which corresponds to periods of economic growth and low credit growth) Causality is from credit to economic growth. In other words, in periods of prosperity, an increase in credit cannot significantly boost economic growth, and due to credit constraints in bad economic conditions, an increase in credit can affect economic growth

Suggested Citation

  • Sajadi, Somayeh Sadat & Khosravinejad, Aliakbar & Momeni Vesalian, Houshang & Emamverdi, Ghodratollah, 2023. "Investigating the Causal Relationship Between Bank Credits and Economic Growth: Markov Switching Nonlinear Granger Causality Approach," Quarterly Journal of Applied Theories of Economics, Faculty of Economics, Management and Business, University of Tabriz, vol. 10(2), pages 31-64, September.
    • Handle: RePEc:ris:qjatoe:0307
    as

    Download full text from publisher

    File URL: https://ecoj.tabrizu.ac.ir/article_16622_02aa918e0eb4ebe09d0d36ec083885d0.pdf
    File Function: Full text
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    Economic Growth; Bank Credits; Nonlinear relation; Markov Switching; Granger Cause;
    All these keywords.

    JEL classification:

    • C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General
    • C19 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Other
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G00 - Financial Economics - - General - - - General
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ris:qjatoe:0307. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sakineh Sojoodi (email available below). General contact details of provider: https://edirc.repec.org/data/fetabir.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.