Impact of Domestic Investment on Domestic Credit Level. Does Institutional Quality Matter?

Heran Li (), Qamar Abbas (), Muhammad Ramzan () and Sumbal Fatima ()
Additional contact information
Heran Li: The University of Queensland
Qamar Abbas: Jiangsu University
Muhammad Ramzan: Jiangsu University
Sumbal Fatima: Nankai University

Journal of the Knowledge Economy, 2025, vol. 16, issue 4, No 27, 14578-14611

Abstract: Abstract Domestic investment can significantly affect the domestic credit market by shaping credit demand, borrower creditworthiness, lender behavior, interest rates, and financial sector policy decisions. These interdependencies underscore the necessity of a balanced and supportive economic environment to foster a healthy interaction between domestic investment and domestic credit levels. This study explores the complex relationship between domestic investment levels and the domestic credit market in the Sub-Saharan Africa region from 2002 to 2022, emphasizing the moderating role of institutional quality. Utilizing the two-step system generalized method of moments (s-GMM) estimation technique, the findings reveal that domestic investment exerts a crowding-out effect on domestic credit levels. However, the results become positively significant when domestic investment interacts with institutional quality variables, suggesting that institutional quality plays a crucial role in influencing domestic credit levels. This study confirms that institutional quality plays a moderating role in the relationship between domestic investment and domestic credit levels in the Sub-Saharan Africa region. We also calculate the marginal effect of institutional quality, which offers valuable insights into specific policy recommendations. These findings highlight the importance of enhancing institutional quality to optimize the positive effects of domestic investment on the domestic credit market.

Keywords: Domestic credit level; Domestic investment; Institutional quality; Sub-Saharan Africa; System generalized method of moments (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s13132-024-02466-y Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:jknowl:v:16:y:2025:i:4:d:10.1007_s13132-024-02466-y

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/13132

DOI: 10.1007/s13132-024-02466-y

Access Statistics for this article

Journal of the Knowledge Economy is currently edited by Elias G. Carayannis

More articles in Journal of the Knowledge Economy from Springer, Portland International Center for Management of Engineering and Technology (PICMET)
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().