Short- Versus Long-Term Credit and Economic Performance: Evidence from the WAEMU

33 Pages Posted: 25 May 2010

See all articles by Kangni Kpodar

Kangni Kpodar

International Monetary Fund (IMF)

Kodzo Gbenyo

affiliation not provided to SSRN

Date Written: May 2010

Abstract

This paper studies the link between financial development and economic growth in the West African Economic and Monetary Union (WAEMU). Using panel data for WAEMU countries over the period 1995-2006, the results suggest that while financial development does support growth in the region, long-term bank financing has a greater impact on economic growth than short-term financing because long-term projects have higher returns adjusted for risks. Given that in the WAEMU short-term credit accounts for about 70 percent of credit to the private sector, WAEMU countries are less able to reap the full benefits of improvements in their financial systems. The results also highlight the importance of macroeconomic stability, a creditor-friendly environment, political stability, and the availability of long-term financial resources in fostering banks’ supply of long-term loans.

Keywords: Bank credit, Banking sector, Credit risk, Cross country analysis, Economic growth, Economic models, Excess liquidity, Financial incentives, Human capital, Loans, Political economy, Time series, West African Economic and Monetary Union

Suggested Citation

Kpodar, Kangni and Gbenyo, Kodzo, Short- Versus Long-Term Credit and Economic Performance: Evidence from the WAEMU (May 2010). IMF Working Paper No. 10/115, Available at SSRN: https://ssrn.com/abstract=1612586

Kangni Kpodar (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Kodzo Gbenyo

affiliation not provided to SSRN

No Address Available

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