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Volume 7 - Number 1 | March 2023

Role of monetary policy in economic growth and development: from theory to empirical evidence

Muhammad Ayub Mehar

28/03/2023 145 0 0
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Public private partnership Financial inclusion Domestic credit to private sector Neoclassical liberalism Ordoliberalism Panel least square

Abstract:

Purpose
This article examines the effects of credit to private sector on the business and trade activities. The effectiveness of rapid expansion in public and private borrowing through state's intervention after COVID-19 pandemic has been assessed in this study.

Design/methodology/approach
The model to determine the role of credit expansion is based on four equations estimated through panel least square technique on 18 years data of 186 countries.

Findings
It is concluded that credit to private sector and external debt improve the investment in infrastructure, which is a significant determinant of gross domestic product growth. Empirical evidences corroborate that higher number of firms using banks to finance their investment and the volume of broad money determine the magnitude of credit to private sector.

Originality/value
This study explores some new evidences and aspects of the credit financing which have not been discussed in this way before.

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Further reading

  1. Amstad, M., Huang, B., Morgan, P.J. and Shirai, S. (2019), “Introduction and overview”, in Amstad, M., Huang, B., Morgan, P.J. and Shirai, S. (Eds), Central Bank Digital Currency and Fintech in Asia, Asian Development Bank Institute, Tokyo, 2019.
  2. Claessens, S., Frost, J., Turner, G. and Zhu, F. (2018), “Fintech credit markets around the world: size, drivers and policy issues”, BIS Quarterly Review, pp. 29-49.

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