A Micro Based Study on Bank Credit and Economic Growth: Manufacturing Sub-Sectors Analysis

Abstract

The manufacturing sector plays an important role in the development of modern economy all over the world. Manufacturing -as a sub -sector of the industry-refers to the production of raw materials and other factors of production, such as labor, land and capital, or goods and services through the production process. With the multiplier effect, the share of the manufacturing industry sectors in the world value added is around 20%. Similarly, the sector also covers about 1 in 9 of the total employment in the world (UNIDO, 2017). As to put it, the share of the sector in GDP is also very high and crucial. For example, in Turkey, the average manufacturing industry share in total GDP is 40% but it varies yearly. While the shares of agriculture and service sectors in GDP were declining in years recently, the share of the industrial sector was increasing (BAT, 2017).To fully realize the importance of the industry in evaluating the above figures, the interaction between the other sectors of the industrial sector and other economic activities on the economy scale has been examined for many years. In the 1920s, British economist Allyn Young suggested that network-type connections between sectors of this type were the Nuri Hacievliyagil, Ibrahim Halil Eksi AbstractThis study examines the relationship between bank credits and performance and growth of manufacturing sub-sectors. Industrial Production Index was used for a different approach as a dependent variable. Indications of the autoregressive distributed lag (ARDL) bound co-integration test support the theory that bank credits are more effective than loan rates on industrial production of sub-sectors. Moreover, the increase in bank credit leads to the rise of industrial production in all the sub-sectors, except Machinery. According to the Toda Yomamato causality test results, there are different degrees of causalities in means of the importance of bank loans for industrial production. On the other hand, in all sub-sectors except machinery and chemical sub-sectors, causality relations were observed at different grades beginning from loan interest rates to industrial production. As a result, this study concludes with the evidence of supply leading hypothesis via the financial sector leads and causes economic growth.

Bank Credit Maturity Structure and Economic Growth in Saudi Arabia

“…Different applied studies in different countries have shown different views on the effect of credit on economic growth. Empirical studies have concluded that there is a positive relationship between bank credit and economic growth in various economies, among other, (Abu-Bader & Abu-Qarn, 2008;Cristea & Dracea, 2010;Iqbal, et al 2012;Murty, et al, 2012;Banu 2013;Barajas, et al, 2013;Hasanov & Huseynov, 2013;Zaghdoudi, et al, 2013;Alkhuzaim, 2014;Timsina, 2014;Oladapo & Adefemi, 2015;Akujuobi & Nwezeaku, 2015;Armeanu, et al, 2015;Ismail & Masih, 2015;Mohanty, et al 2016.;Timsina & Pradhan, 2016;Singh, et al 2016;Okafor, et al 2016;Ananzeh, 2016;Abusharbeh, 2017;Bist, 2018;Hacievliyagil & Eksi, 2019;Awad & Al Karaki, 2019;Zıdan, 2019;Camba & Camba, 2020). Furthermore, Mushabeb, (2015) confirms the small positive impact of bank credit on Yemeni economy.…”

Industrial Sector output and Its Relationship with Government Expenditure, Credit, and Foreign Aid in Nepal

“…This study concluded that banks are important catalysts for industrialization. Hacievliyagil and Eksi (2017) investigated the link between bank loans and performance, as well as the expansion of manufacturing sub-sectors. As a dependent variable, the Industrial Production Index was employed uniquely.…”

Analyzing financial risks in small and medium enterprises: evidence from the food processing firms in selected cities in Ghana

“…The financial-growth nexus (Schumpeter, 1911) argues for the critical role of finance in the growth of an economy including its agents such as the firm. The theory postulates that finance is critical in promoting innovations; and that economies with better financial infrastructure will grow faster (Jayaratne and Strahan, 1996;Hacievliyagil and Eksi, 2019). This implies access to finance is a key determinant of the firm's growth (Regasa et al, 2019).…”