A MICRO BASED STUDY FOR BANK CREDIT AND ECONOMIC GROWTH: MANUFACTURING SUB-SECTORS ANALYSIS

Abstract

This study examines the relationship of the bank credits between, either performance and growth of manufacturing sub-sectors. It is using monthly time series data of Turkey from 2010/01 to 2017/09. The study adopted the autoregressive distributed lag (ARDL) bound co-integration test approach together with TodaYomamato causality test and was employed to seven manufacturing sub-sectors. Industrial production index was used for different approach as a dependent variable. Indications of the study support the theory that bank credits are more effective than loan rates on industrial production of sub-sectors. Moreover, the increase in bank credit leads the rise of industrial production in all the sub-sectors, except Machinery. According to the Toda Yomamato causality test results, there are different degrees of causalities in means of importance of the bank loans for industrial production. On the other hand, in all sub-sectors except machinery and chemical sub-sectors, causality relations were observed at different grades beginning from loan interest rates to industrial production. As a result, this study concludes with the evidence of supply leading hypothesis via financial sector leads and causes the economic growth.