The Impact of Financial Deepening on Economic Growth: Empirical Evidence from Yemen (1994-2018)

Abstract

This study attempted to investigate the impact of financial deepening on economic growth in Yemeni, using time series based on the use and application of an Autoregressive Distributed Lag Model (ARDL), where data is collected from the World Bank, Yemen's central bank, and the central statistical organization for 1994-2018. The importance of the study lies in knowing the role of financial and economic policies by measuring and analyzing the impact of financial deepening on the Yemeni economy. The study used the independent variable of financial deepening captured by credit to the private sector, grants, Remittances, money supply, banks assets, and foreign direct investment, while the dependent variable gross domestic product is used to measure the economic growth. The results revealed a significant impact of financial deepening on Yemen's economic growth and found the existence of co-integration between the variables and long run relationship. The study recommended that policies that encourage credit borrowing for the private sector should be encouraged.