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Bank credit to the private sector: VECM approach for Albania

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  • Adelajda MATUKA

    (Department of Economics and Law, University of Macerata, Italy.)

Abstract

This study evaluates the determinants of bank credit to the private sector in Albania from 2000 to 2017 using a Vector Error Correction Model which includes both demand and supply-side factors. We perform Augmented Dickey Fuller Test, Phillips-Perron test and Johansen cointegration test to ensure the stationarity and long-run relation between explanatory variables. The results show that credit to the private sector is positively related to economic growth. A higher lending rate will decrease the bank credit to the private sector. Further, the decrease of non-performing loans and domestic government debt will increase the funds available for the private sector. The negative sign of error correction term and the diagnostic tests for autocorrelation, normality and ARCH effects ensure that our model is properly defined.

Suggested Citation

  • Adelajda MATUKA, 2019. "Bank credit to the private sector: VECM approach for Albania," Journal of Economics and Political Economy, EconSciences Journals, vol. 6(2), pages 159-171, June.
    • Handle: RePEc:cvv:journ1:v:6:y:2019:i:1:p:159-171
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    References listed on IDEAS

    as
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    Keywords

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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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