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Examining the Causal Relationship between Private Sector Credit Extended and Economic Growth in Namibia

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  • Andreas
  • J P S Sheefeni

Abstract

The paper examined causality between Private Sector Credit Extension (PSCE) and Economic growth using quarterly data for the period 2000:Q1-2017:Q4, in Namibia. The variables employed were Gross Domestic Product (GDP), Private Sector Credit Extended, Broad Money Supply (M2) and lending rates. The study tested for stationarity in order to determine the order of integration. Furthermore, a co-integration test was conducted on different sets of variables to establish the long run relationship. Granger causality test was also conducted to establish the direction of the relationships between the variables. The results for the stationarity test showed a combination of different orders of integration. The co-integration test revealed a stable long-run relationship among the variables. The Granger causality test results revealed one-directional causality running from PSCE to GDP. Therefore, one can conclude that that change in private sector credit extended can help predict economic growth.

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  • Andreas & J P S Sheefeni, 2019. "Examining the Causal Relationship between Private Sector Credit Extended and Economic Growth in Namibia," Journal of Economics and Behavioral Studies, AMH International, vol. 11(2), pages 23-29.
    • Handle: RePEc:rnd:arjebs:v:11:y:2019:i:2:p:23-29
    DOI: 10.22610/jebs.v11i2(J).2815
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    1. Vahid Puryan, 2017. "The Causal Relationship between Economic Growth, Banking Sector Development and Stock Market Development in Selected Middle-East and North African Countries," International Journal of Economics and Financial Issues, Econjournals, vol. 7(3), pages 575-580.
    2. Izz Eddien N. Ananzeh, 2016. "Relationship between Bank Credit and Economic Growth: Evidence from Jordan," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 7(2), pages 53-63, April.
    3. Natalya Martynova, 2015. "Effect of bank capital requirements on economic growth: a survey," DNB Working Papers 467, Netherlands Central Bank, Research Department.
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