ECONOMIC FACTORS INTERACTION ON THE CREDIT LEVEL OF THE ECONOMY. A VAR MODEL OF ALBANIA

Glediana Foto and Valentina Sinaj
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Glediana Foto: University of Tirana, Albania
Valentina Sinaj: University of Tirana, Albania

Studies in Business and Economics, 2013, vol. 8, issue 3, 41-49

Abstract: The aim of this paper is to show how some macroeconomic factors such as inflation, interest rates, credit and money supply are related to the credit level of the economy. The analysis will be preceded by a brief review of international literature on the development of various models in time, mainly VAR models. The methodology used to achieve this goal is the establishment of an econometric model and its analysis through the method of auto regression vectors (VAR). In our paper we have considered four variables, which are as follows: credit level of the economy (kr); loan interest rate (ikr); inflation rate (infl); circulating money supply (M2) . All data were collected on a monthly basis from 2002 to 2008, involving a total of 84 observations. Through auto regression vectors model (VAR) we will try to discover the link between these variables to conclude which of the model equations is more important. Through various tests such as causality test of Granger we will try to determine which of the dependent variables is independent and which dependent, therefore to determine which of them is the cause or the consequence of other variables. From this paper it was concluded that the credit level of the economy is caused more by the large measure of money supply then by the loan interest rate.

Keywords: credit level; loan interest rate; inflation rate; M2; VAR Model (search for similar items in EconPapers)
Date: 2013
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