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Sadaf Majeed*, Syed Faizan Iftikhar** and Zeeshan Atiq*** ()

Pakistan Journal of Applied Economics, 2019, vol. 29, issue 1, 107-129

Abstract: This study analyzes the real impact of enterprise credit and household credit separately on economic growth for a selected group of 36 developed and developing countries. Since most of the available literature on growth and finance show contrast in the economic theory and does not distinguish between the household credit and enterprise credit when it measures the relationship between credit growth and economic growth respectively. The unbalanced panel data for the group of 36 countries is used over the period 2000–2016. The empirical results show that by using the full sample, enterprise credit is positively associated with economic growth but household credit tends to hamper the economic growth. However, individual analysis of developed and developing countries shows that the financial sector provide considerable growth to support its role in terms of credit to enterprise in developing countries. In contrast, the enterprise credit seems to have no role in promoting economic growth of the developed economies, which may be due to their financial crisis. However, investment is quite significant for both developed and developing countries, which indicate that investment has the potential to accelerate economic growth. The evidence also suggest that a more sophisticated enterprise credit policy should be designed in both developed and developing countries to promote economic growth in the long-run.

Date: 2019
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