IS CREDIT AVAILABILITY AND GROWTH RELATED? CASE OF BRAZIL

Authors

  • Eduardo Kazuo Kayo Federal University of Curitiba,
  • Joelson Sampaio Sao Paulo State University,
  • Rodolfo Leandro de Faria Olivo Federal University of Santa Maria,

DOI:

https://doi.org/10.51594/ijae.v1i2.55

Keywords:

Bank credit, Granger Causality, Johansen Test, Credit and Economic Growth

Abstract

The focus of the current study was to test the influence of credit availability on economic growth of Brazilian economy.  The study time period was from 1951 to 2014 for overall bank credit; while, credit data at sectoral level covered the time period of 1973 to 2014. The annual overall and sectoral data for GDP is based on GDP at factor cost/GVA at basic prices at 2004-05 prices. Different metrics for credit and output is used to test the relationship at an overall as well as sectoral level. The credit growth and GDP growth variables are tested for stationarity using ADF test, PP test and KPSS test.  For establishing long term relationship, we utilized Johansen test. For establishing the short-run relationship, we utilized Granger causality test. Data related to the GDP states that there is significant improvement in average growth rate during the 1990s. Co-integration test results as provided indicate that a long-term association between overall growth and overall credit exist for the period of 1952-1992, however, this relationship is not established post1992 time period. Our analysis suggests that there exist a long-term co-integration relationship between manufacturing credit and manufacturing GDP. However, we did not find the relationship between industrial credit and industrial GDP which suggest these are not co-integrated. Overall, our results show that there is correlation between Credit Growth and GDP Growth.

Published

2019-10-24 — Updated on 2020-06-22

Issue

Section

Articles