CREDIT CREATION BY COMMERCIAL BANKS AND ECONOMIC GROWTH IN SIERRA LEONE (1992-2022) AN AUTOREGRESSIVE DISTRIBUTED LAG TECHNIQUE

Richard E. O. Pearce, Abdullah Bah, Ambalieu Barrie, Mohamed Ernest Smith

Abstract


The study examined the nexus between credit creation and economic growth by commercial banks in Sierra Leone's for the period 1992 to 2022. Specifically, it focused on the influence of commercial bank lending on private sector growth and development. Variables such as interest rate, real exchange rate and inflation are used as independent variables. Gross Domestic Product (GDP) was the chosen metric to represent economic growth, serving as the dependent variable. To ensure uniformity in data analysis, all variables were logged. The study employed the Autoregressive Distributed Lag (ARDL) technique as the primary analytical model. The findings of the regression analysis revealed a direct and positive impact of commercial bank lending on Sierra Leone's economic growth. However, it is noteworthy that the study identified inflation and interest rates as factors exerting negative effects on economic growth.

JEL: E44, E51, G21, O16, O40

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Keywords


credit creation, economic growth, commercial banks

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DOI: http://dx.doi.org/10.46827/ejefr.v8i2.1680

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