Borrow more and promote economic growth? A Granger causality analysis
(2014) NEKN01 20141Department of Economics
- Abstract
- Before the financial crisis in the US, many politicians and scholars considered credit as something positive and important for an economy. After the financial crisis in the US the view on credit somewhat changed. This thesis provides new evidence on how credit and economic growth is related. Previous studies which have investigated the relationship between credit and economic growth have used the measurement “credit to private sector as a percentage of GDP”, which includes both household and enterprise credit. Since household and enterprise credit may have different impact on economic growth it is important to evaluate these variables separately. In this study credit to private sector has been decomposed into household and enterprise... (More)
- Before the financial crisis in the US, many politicians and scholars considered credit as something positive and important for an economy. After the financial crisis in the US the view on credit somewhat changed. This thesis provides new evidence on how credit and economic growth is related. Previous studies which have investigated the relationship between credit and economic growth have used the measurement “credit to private sector as a percentage of GDP”, which includes both household and enterprise credit. Since household and enterprise credit may have different impact on economic growth it is important to evaluate these variables separately. In this study credit to private sector has been decomposed into household and enterprise credit to evaluate the causal relationship. By performing a Granger causality test on 24 developed countries, this study finds a bi-directional causal relationship between household credit and economic growth. This is an important result, since it confirms the potential consequences of monetary policy. Previous theoretical and empirical literature predicts a positive relationship between enterprise credit and economic growth. This study, however, provides evidence that there is a negative causal linkage running from enterprise credit to economic growth. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/4611915
- author
- Nilsson, Linnea LU
- supervisor
- organization
- course
- NEKN01 20141
- year
- 2014
- type
- H1 - Master's Degree (One Year)
- subject
- keywords
- Enterprise credit, Household credit, Economic growth, Generalized Method of Moments, Panel Granger Causality
- language
- English
- id
- 4611915
- date added to LUP
- 2014-09-22 11:44:24
- date last changed
- 2014-09-22 11:44:24
@misc{4611915,
abstract = {{Before the financial crisis in the US, many politicians and scholars considered credit as something positive and important for an economy. After the financial crisis in the US the view on credit somewhat changed. This thesis provides new evidence on how credit and economic growth is related. Previous studies which have investigated the relationship between credit and economic growth have used the measurement “credit to private sector as a percentage of GDP”, which includes both household and enterprise credit. Since household and enterprise credit may have different impact on economic growth it is important to evaluate these variables separately. In this study credit to private sector has been decomposed into household and enterprise credit to evaluate the causal relationship. By performing a Granger causality test on 24 developed countries, this study finds a bi-directional causal relationship between household credit and economic growth. This is an important result, since it confirms the potential consequences of monetary policy. Previous theoretical and empirical literature predicts a positive relationship between enterprise credit and economic growth. This study, however, provides evidence that there is a negative causal linkage running from enterprise credit to economic growth.}},
author = {{Nilsson, Linnea}},
language = {{eng}},
note = {{Student Paper}},
title = {{Borrow more and promote economic growth? A Granger causality analysis}},
year = {{2014}},
}