Sarvinaz Khanlarzadeh



Econometric Analysis of the Effect of Credit Volume on Money Supply and Economic Growth: in the Case of Azerbaijan

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Banks are one of the financial entities that perform the work of financial intermediation and, as a result of the loans they provide, help to promote productivity, jobs, and economic development. By increasing their lending volumes, banks will be able to expand their money supply, which will result in a boost to the economy's overall performance. As a result, extensive studies have been conducted to determine the link between bank loans and economic development. This research aims to investigate the relationship between loan volume and money supply in Azerbaijan's economy. As a method, FMOLS, DOLS and Granger Causality tests, which show cointegration, causality and correlation coefficient from econometric models, were chosen for the data containing quarterly time series of 2006:M1-2021:M9 period. Therefore, it was found that a one-way causal link exists between money supply and domestic credit volume, and a one-way causal relationship exists between economic growth and domestic credit volume. Also, a long-term relationship was found between the amount of money and credit available to people in their own country and how quickly their economy grows. According to the FMOLS test, a 1 percent rise in domestic loan volume raises the money supply by 1.078183 percent (1.022554 according to DOLS). Performing the FMOLS test does not affect economic development. The FMOLS test found that for every one percent increase in domestic loan volume, economic growth improves by 0.44243 percentage points, based on the number of domestic loans (0.439953 percent according to DOLS).


Credit, Volume, Money Supply, Economics, Growth, Causality


Cite this paper

Sarvinaz Khanlarzadeh. (2022) Econometric Analysis of the Effect of Credit Volume on Money Supply and Economic Growth: in the Case of Azerbaijan. International Journal of Economics and Management Systems, 7, 451-463


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