Do Credit and Employment Exhibit Long-Run Convergence? Empirical Evidence from the State of Santa Catarina

Credit and employment are fundamental variables for measuring the socioeconomic development of a region. This study examines the convergence between credit levels and employment in the economy of the state of Santa Catarina, Brazil. A theoretical and empirical review was conducted on the credit market and its connection to economic growth and employment. The initial hypothesis considers that credit and employment exhibit long-run convergence. The methodological approach adopted involves the application of an error correction model (ECM), which provides a comprehensive view of the short- and long-run interactions between employment and credit. In addition, the causality between the variables is assessed. These relationships are crucial for policymakers and economic analysts when making decisions and forecasting economic trends. The results indicate a stable long-run relationship between the variables analyzed. In the short run, credit adjusts more rapidly than employment in response to deviations in the economy of Santa Catarina. The causality effect suggests that employment stock causes credit balances.