Impact of Bank Lending on Economics Growth in Pakistan: An Empirical Study of Lending to Private Sector

Abstract

Bank credit plays an important role in the economy of any nation. The current study examined the association among bank credit to private sector and economic growth in Pakistan. Economic growth was taken as dependent variable, while bank credit to private sector, interest rate, inflation, investment to GDP and government consumptions were taken as independent variables. Secondary data were collected from World Bank Indicator, ranging for the period 1973 to 2013. Descriptive research and correlation were used to check the normality of data. Unit root test was used to check the stationarity of variables. Co-integration VECUM and Granger Casuality test were statistically used to test the variable relationship and casuality effect of the variable. Regression analysis was used to analyze the impact of bank credit on economic growth. The findings of the study showed that bank credit had extensive relationship with economic progression; in short term the relationship was also significant. Regression analysis showed that there was adverse impact of bank credit on economic growth in Pakistan. However, problem associated with bank credit facility is the constraint and regulation imposed by SBP on the percentage of credit to be given to the Entrepreneurs. For solitary in the meantime bank lending has a casual influence on economic growth, there is a policy need to give devotion to liberalization the monetary sector.

Real Gross Domestic Growth Determinants in an Oil Revenue Dependent Country: An Assessment of Nigeria’s Exchange Rate and Interest Rate

“…The implication is that for Nigeria to ensure sustainability in gross domestic product growth, the exchange rate must be favourable while interest rate reduced to barest minimum to allow access to credit at low cost. This is in agreement with [8], [13], [20], [21], [22] and [27] for Nigeria, [15] for Kenya, [17] for 18 developing countries of the world, [23] for Pakistan and [28] on contractional effect of high interest rate on annual GDP of major industrial countries. Finally, through the Granger Causality analysis, it was empirically established that exchange rate and interest rate are not determinants of real gross domestic product growth in Nigeria.…”

“…Following the report of National Bureau of Statistic on the real economy for the year 2016, the exchange rate crisis which still exists as at the time this study was carried out, deteriorated Nigeria real gross domestic product from N69, 023.93 billion in 2015 to N67, 984.20 billion in 2016. The inability of exchange rate and interest rate to predict growth in real gross domestic product of Nigeria is consistent with previous studies: [8], [13] and [27] for Nigeria, [16] for Bangladesh economy, [23] for Pakistan but disagrees with [18] who asserted that exchange rate significantly determines real gross domestic product in Malaysia.…”

“…Similarly, [21] pointed out that in Nigeria, exchange rate is a significant monetary policy instrument that drive growth. [23] noted from Nigeria business environment that the relationship between interest rate and output is inverse in accordance with the standard growth theory and suggested for lower interest rate to tremendously enhance economic growth. The importance of low interest rate in developing economies to increase output have been also documented by [23] for Pakistan, [24] and [25] for Iran.…”

“…[23] noted from Nigeria business environment that the relationship between interest rate and output is inverse in accordance with the standard growth theory and suggested for lower interest rate to tremendously enhance economic growth. The importance of low interest rate in developing economies to increase output have been also documented by [23] for Pakistan, [24] and [25] for Iran. The high interest rate in Country: An Assessment of Nigeria's Exchange Rate and Interest Rate Nigeria is unbearable by investors who would rather source fund from families, relatives, friend and credit and thrift societies among others.…”

Internet Usage, Financial Sector Development, and Economic Growth: A Cross-District Data in Aceh

“…Artinya volume kredit perbankan berpengaruh terhadap pertumbuhan ekonomi, dan demikian pula sebaliknya. Osman (2014), Tahir et al (2015) dan Oladapo & Obalade (2015) juga menemukan bukti empiris bahwa penyaluran kredit perbankan dapat meningkatkan pertumbuhan ekonomi.…”