| Title : | Impact of bank lending on economic growth of Nepal | | Material Type: | printed text | | Authors: | Srijana Thapa, Author | | Publication Date: | 2017 | | Pagination: | 97p. | | Size: | Book | | Accompanying material: | 10/B | | Languages : | English | | Descriptors: | Economic development
Economic growth
| | Keywords: | 'economic growth commercial bank bank bank and banking economic development nepal' | | Class number: | 338.9 | | Abstract: | Bank lending refers to the funds granted to individuals and organizations to meet their temporary or long- term deficit operations (Mbat, 2006). Bank lending includes short, medium and long-term loans and advances. Bank lending activities generate economic growth through resources provision for real investment (Mckinnon, 2010). Lending activities of various commercial banks depend on the willingness to extend much credit to some sectors of the economy. Economic growth is an increase in the values of goods and services produced by an economy (Mishkin and Calvo, 2003). It is measured as the percentage rate of increase in real GDP.
Habibullah and Eng (2006) found that bank lending has positive relationship with economic growth. Likewise, Mamman and Hashim (2014) reveled that there is significant positive impact of bank lending on economic growth in Nigeria. Koivu (2002) also found that bank lending has significantly positive and causal impact on economic growth. The bank credit helps to increase the economic performance (Ugoani, 2013). Jaffee (2001) assessed that bank efficiency is significantly and positively related to economic output. Husain et. al (2015) concluded that interest rate and inflation have a negative impact on RGDP. Faria and Carneiro (2001) found that although there is a negative relationship between inflation and economic growth in the short-run, inflation does not affect economic growth in the long-run. However, Chimobi (2010) concluded that there is no long run relationship between inflation and economic growth in Nigeria. Similarly, Beck et al. (2002) accounted a positive relationship between economic growth and inflation in short run.
In the context of Nepal, Gautam (2014) revealed that financial development causes economic growth. In fact, financial development is the cause of economic growth in terms of short-term dynamics, while economic growth sustains financial development in long run. Adhikari (2014) concluded that net effect of inflation is positive on the growth of Nepalese economy. Budha (2013) concluded that real GDP growth is found to be positively affecting the bank's loan growth. Likewise, Kharel and Pokharel (2012) argued that banking sector plays a key role in promoting economic growth compared to capital market in Nepal. Timsina (2014) found a positive relationship of bank credit to the private sector on the economic growth in the long run. Bist (2016) found a negative relationship between inflation and real gross domestic product growth in long run. However, the relationship is positive in the case of short run.
The study reveals that there is long run co- integrating relationship between bank lending and economic growth in Nepal. The study shows that lending interest rate has long run negative relationship with economic growth. This study also finds that domestic credit to private sector have long-run positive relationship with economic growth. Similarly, money supply and government expenditure have positive relationship with gross fixed capital formation. However, the result shows that government expenditure has negative relationship with real gross domestic product in the long-run. The estimates of error correction model show that beta coefficients are negative for lending interest rate, inflation and total assets whereas the beta coefficients are positive for money supply and domestic credit to private sector. However, the coefficients are significant only for money supply, total assets and credit to private sector with economic growth. The granger causality depicts that there is unidirectional causality from money supply to gross fixed capital formation. Similarly, there exits unidirectional causality between interest rate and gross fixed capital formation, domestic credit to private sector and gross fixed capital formation and government expenditure to gross capital formation. However, that there is no causal relationship between inflation and gross fixed capital formation. There is unidirectional causality form inflation to real gross domestic product growth. It indicates that inflation has impact on the real gross domestic product growth. On the other hand, the results show that there is no causal relationship of money supply, government expenditure, lending interest rate, total assets, interest rate and domestic credit to private sector with real gross domestic product growth.
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Impact of bank lending on economic growth of Nepal [printed text] / Srijana Thapa, Author . - 2017 . - 97p. ; Book + 10/B. Languages : English | Descriptors: | Economic development
Economic growth
| | Keywords: | 'economic growth commercial bank bank bank and banking economic development nepal' | | Class number: | 338.9 | | Abstract: | Bank lending refers to the funds granted to individuals and organizations to meet their temporary or long- term deficit operations (Mbat, 2006). Bank lending includes short, medium and long-term loans and advances. Bank lending activities generate economic growth through resources provision for real investment (Mckinnon, 2010). Lending activities of various commercial banks depend on the willingness to extend much credit to some sectors of the economy. Economic growth is an increase in the values of goods and services produced by an economy (Mishkin and Calvo, 2003). It is measured as the percentage rate of increase in real GDP.
Habibullah and Eng (2006) found that bank lending has positive relationship with economic growth. Likewise, Mamman and Hashim (2014) reveled that there is significant positive impact of bank lending on economic growth in Nigeria. Koivu (2002) also found that bank lending has significantly positive and causal impact on economic growth. The bank credit helps to increase the economic performance (Ugoani, 2013). Jaffee (2001) assessed that bank efficiency is significantly and positively related to economic output. Husain et. al (2015) concluded that interest rate and inflation have a negative impact on RGDP. Faria and Carneiro (2001) found that although there is a negative relationship between inflation and economic growth in the short-run, inflation does not affect economic growth in the long-run. However, Chimobi (2010) concluded that there is no long run relationship between inflation and economic growth in Nigeria. Similarly, Beck et al. (2002) accounted a positive relationship between economic growth and inflation in short run.
In the context of Nepal, Gautam (2014) revealed that financial development causes economic growth. In fact, financial development is the cause of economic growth in terms of short-term dynamics, while economic growth sustains financial development in long run. Adhikari (2014) concluded that net effect of inflation is positive on the growth of Nepalese economy. Budha (2013) concluded that real GDP growth is found to be positively affecting the bank's loan growth. Likewise, Kharel and Pokharel (2012) argued that banking sector plays a key role in promoting economic growth compared to capital market in Nepal. Timsina (2014) found a positive relationship of bank credit to the private sector on the economic growth in the long run. Bist (2016) found a negative relationship between inflation and real gross domestic product growth in long run. However, the relationship is positive in the case of short run.
The study reveals that there is long run co- integrating relationship between bank lending and economic growth in Nepal. The study shows that lending interest rate has long run negative relationship with economic growth. This study also finds that domestic credit to private sector have long-run positive relationship with economic growth. Similarly, money supply and government expenditure have positive relationship with gross fixed capital formation. However, the result shows that government expenditure has negative relationship with real gross domestic product in the long-run. The estimates of error correction model show that beta coefficients are negative for lending interest rate, inflation and total assets whereas the beta coefficients are positive for money supply and domestic credit to private sector. However, the coefficients are significant only for money supply, total assets and credit to private sector with economic growth. The granger causality depicts that there is unidirectional causality from money supply to gross fixed capital formation. Similarly, there exits unidirectional causality between interest rate and gross fixed capital formation, domestic credit to private sector and gross fixed capital formation and government expenditure to gross capital formation. However, that there is no causal relationship between inflation and gross fixed capital formation. There is unidirectional causality form inflation to real gross domestic product growth. It indicates that inflation has impact on the real gross domestic product growth. On the other hand, the results show that there is no causal relationship of money supply, government expenditure, lending interest rate, total assets, interest rate and domestic credit to private sector with real gross domestic product growth.
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