The Causal Relationship between Private Sector Credit Growth and Economic Growth in Bangladesh: Use of Toda-Yamamoto Granger Causality test in VAR Model

Uttam Chandra Paul

MPRA Paper from University Library of Munich, Germany

Abstract: This paper examines the causal relationship between private sector credit growth and economic growth in Bangladesh by using annual time series data over the period of 1976-2017. To investigate this relationship, the Autoregressive Distributed Lag (ARDL) Approach has been used. In addition, this paper examines the direction of causality by adopting the Toda-Yamamoto procedure of Granger Causality test in the VAR model. The empirical results show that the annual growth rate of private sector credit (PC) and industrial production index (IPI) have a positive and significant effect on annual growth rate of GDP in both long-run and short-run. But there is only a short-run positive effect of export (X) and a negative effect of broad money (BM) on GDP growth rate. Finally, the results of the Toda-Yamamoto Granger Causality test show that there is unidirectional causality from GDP growth rate to private sector credit growth rate.

Keywords: Bangladesh; GDP growth; Private sector credit growth; Autoregressive Distributed Lag (ARDL) Approach; Toda-Yamamoto Granger Causality test. (search for similar items in EconPapers)
JEL-codes: C22 E51 O47 (search for similar items in EconPapers)
Date: 2020-12-02, Revised 2020-12-04
New Economics Papers: this item is included in nep-fdg, nep-gro and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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