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Credit expansion and social welfare in the European Union

Author

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  • Stanislav PERCIC

    () (PhD in Finance from the Alexandru Ioan Cuza University of Iasi, Romania)

Abstract

The aim of this paper is to analyse the impact of the credit expansion process on social welfare through the financial-monetary dimension with a focus on 22 economies from the European Union. In order to achieve this aim, the study seeks, on the one hand, to analyse the short-term dynamics (from one quarter to the other) of the relationships between the total volume of domestic credit to private sector (highlighting thus the credit expansion process) and the GDP per capita (the proxy for social welfare) and, on the other hand, to determine the impact of credit expansion on social welfare on medium and long term using the multiple regression model. The findings revealed that even the correlation between the credit expansion and social welfare is very strong and positive in almost all the analysed countries, the total volume of domestic credit to private sector influences unidirectionally the GDP per capita in only 11 of the 22 states. However, on medium and long term, the credit expansion process has a positive effect on social welfare in all the analysed EU countries.

Suggested Citation

  • Stanislav PERCIC, 2018. "Credit expansion and social welfare in the European Union," CES Working Papers, Centre for European Studies, Alexandru Ioan Cuza University, vol. 10(4), pages 491-509, January.
    • Handle: RePEc:jes:wpaper:y:2018:v:10:i:4:p:491-509
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    File URL: http://www.ceswp.uaic.ro/articles/CESWP2018_X4_PER.pdf
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    References listed on IDEAS

    as
    1. Stanislav PERCIC, 2013. "Social Welfare: Insights From The Austrian School Of Economics," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 12, pages 11-17, June.
    2. G. B. Gorton & Ping He, 2008. "Bank Credit Cycles," Review of Economic Studies, Oxford University Press, vol. 75(4), pages 1181-1214.
    3. repec:dau:papers:123456789/7353 is not listed on IDEAS
    4. Jonathan Chiu & Mei Dong & Enchuan Shao, 2018. "On The Welfare Effects Of Credit Arrangements," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 59(3), pages 1621-1651, August.
    5. Mariana Rojas Breu, 2013. "The Welfare Effect Of Access To Credit," Economic Inquiry, Western Economic Association International, vol. 51(1), pages 235-247, January.
    6. Jonathan Morduch, 1999. "The Microfinance Promise," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1569-1614, December.
    7. Paul Gertler & David I. Levine & Enrico Moretti, 2009. "Do microfinance programs help families insure consumption against illness?," Health Economics, John Wiley & Sons, Ltd., vol. 18(3), pages 257-273, March.
    8. Mark M. Pitt & Shahidur R. Khandker, 1998. "The Impact of Group-Based Credit Programs on Poor Households in Bangladesh: Does the Gender of Participants Matter?," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 958-996, October.
    9. Anders Aslund, 2011. "Lessons from the East European Financial Crisis, 2008-10," Policy Briefs PB11-9, Peterson Institute for International Economics.
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