The impact of bank lending on Palestine economic growth: an econometric analysis of time series data
Date
2019-03-18
Authors
Awad, Ibrahim M.
Al Karaki, Mohammed S.
Journal Title
Journal ISSN
Volume Title
Publisher
Springer
Abstract
Banking is an essential sector of Palestine’s economy. More credits provided by banks
are considered to have a positive impact on economic growth so that the overall
objective of this study is to examine the impact of bank lending on economic
growth in Palestine. The study employs the Augmented Dickey-Fuller to test for
stationarity in the time series, The Johansen co-integration, Vector Autoregressive
Model and Vector Error Correction Model are employed to identify the long-run and
short-run dynamics among the variables, and Granger causality test in order to
determine the direction of causality. The study finds that a long run relationship
exists among the variables and insignificant short run relationship. Also, the study
findings show that there is unidirectional causality and runs from GDP to bank
lending. The insignificant contribution of bank lending to GDP is attributed to the
fact that banks are not highly interested in lending to the production sector of the
economy due to the high level of risk. However, the primary empirical evidence
reveals that bank lending doesn’t cause economic growth, but economic growth
causes bank lending.
Description
Keywords
Economic growth , Error correction model , Bank lending , Granger causality test , Palestine , Unit root tests , Solow growth model
Citation
Awad, I.M. & Al Karaki, M.S. Financ Innov (2019) 5: 14. https://doi.org/10.1186/s40854-019-0130-8