The Differential Impact of Financial Intermediation on Economic Growth in Oil-Dependent Economies
Review of Economic Analysis 10 (2018), 267-284
18 Pages Posted: 6 Jun 2019
Date Written: October 1, 2018
This paper analyses the relationship between bank credit and economic growth. We extend existing literature by treating separately the oil and non-oil sectors of 28 oil-dependent economies from 1990-2012. We employ panel cointegration and pooled mean group estimation techniques which are appropriate for drawing conclusions from dynamic heterogenous panels. The results of the panel cointegration test indicate that bank credit has no significant long-run relationship with non-oil GDP per capita. The results of the pooled mean group estimator reveal no significant long-run impact of bank credit on non-oil GDP per capita. Overall results suggest that banks so not yet provide adequate credit to stimulate non-oil economic growth. The policy implication of our findings is that the financial sector should be more involved in productive investment activities to promote inclusive growth.
Keywords: Banks, oil-dependent, non-oil sector, credit, growth
JEL Classification: E02, O11, G21, E51
Suggested Citation: Suggested Citation