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Does Credit Expansion Matter for Growth? What the Data Show

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Does Credit Expansion Matter for Growth? What the Data Show

This paper analyses the relationship between expansion of domestic credit to private sector relative to GDP and growth for a sample of 65 less developed countries over a long period, 1980-2006. Using causality tests at various lag-orders we find a strong evidence of mutual causation. We have used alternative dynamic panel data models such as mean group, pooled mean group and dynamic fixed effect. Hausman test suggests dynamic fixed effect model. While the mean group model suggests no relationship in either direction, the other two models show two opposite long-term relationships: credit to-growth relationship is negative whereas growth-to-credit link is positive.

Sarkar, Prabirjit (2009) Does Credit Expansion Matter for Growth? What the Data Show. In: W G Hart Legal Workshop 2009: Law Reform and Financial Markets: Institutions and Governance, 23rd - 25th June 2009, Institute of Advanced Legal Studies, London. (Unpublished)

Item Type: Conference or Workshop Item (Paper)
Additional Information: Paper presented by Professor Dr Prabirjit Sarkar, Jadavpur University, Kokata (Calcutta), India
Subjects: Economics
Keywords: Loans -- law and legislation, Security (Law), Financial development, Growth, Dynamic panel data analysis
Divisions: Institute of Advanced Legal Studies
Collections: W G Hart Legal Workshop papers
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