On the Causality between Domestic Credit Aggregates and Economic Growth in a Multivariate VAR Framework: Evidence from Nigeria
AbstractThe major objective of this paper is to empirically investigate the relationship between domestic credit and economic growth in Nigeria, using annual time series data from 1970 to 2012. In order to do this, the study employs KPSS unit root test, Johansen cointegration test, VAR modeling, impulse response function, variance decomposition and granger causality. Firstly, the findings reveal that there is a bi-directional causality and positive relationship between domestic credit and the economic growth in Nigeria. That is, domestic credit does not only contribute positively to economic growth in Nigeria, but the impact is strong and statistically significant. The findings have a strong implication on financial policy in Nigeria. The major implication is that an efficient financial system is one of the foundations for building sustained economic growth. Considering regulations, institutional constraints and other macro-economic factors militating against domestic credit in the economy, government should make the environment conducive and supportive so that performance is enhanced and good lending behaviour guaranteed.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 51731.
Date of creation: Nov 2013
Date of revision:
Domestic Credit; Economic growth; Johansen cointegration test; VAR modeling; impulse response function; variance decomposition and granger causality; financial system and Nigeria;
Find related papers by JEL classification:
- E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
- E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- O1 - Economic Development, Technological Change, and Growth - - Economic Development
- O42 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Monetary Growth Models
This paper has been announced in the following NEP Reports:
- NEP-AFR-2013-12-06 (Africa)
- NEP-ALL-2013-12-06 (All new papers)
- NEP-FDG-2013-12-06 (Financial Development & Growth)
- NEP-MAC-2013-12-06 (Macroeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Abu-Bader, Suleiman & Abu-Qarn, Aamer, 2006.
"Financial Developent and Economic Growth Nexus: Time Series Evidence from Middle Eastern and North African Countries,"
972, University Library of Munich, Germany.
- Suleiman Abu-Bader & Aamer Abu-Qarn, 2006. "Financial Developent and Economic Growth Nexus: Time Series Evidence from Middle Eastern and North African Countries," Working Papers, Ben-Gurion University of the Negev, Department of Economics 223, Ben-Gurion University of the Negev, Department of Economics.
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