BANKING DEVELOPMENT AND NON-OIL GROWTH NEXUS: A CAUSAL ANALYSIS IN THE CASE OF KUWAIT: 1992-2012
Journal Title: European Journal of Business and Social Sciences - Year 2014, Vol 3, Issue 9
Abstract
This paper aims to investigate the type of relationship between financial development indicators and non-Oil economic growth in the case of Kuwait by using annual data 1992-2012 retrieved from international financial statistics (IFS) of the International Monetary Fund (IMF) and the world Bank development indicators (WB), This study employs the Johansen and Juselius Cointegration test and Vector Error Correction Model (VECM) to reveal the long-run and short-run causality between the financial development and non-Oil GDP growth. The results show that there is a long-run causality from all the financial development selected indicators to the non-Oil GDP, the short-run deviations are corrected to the long-run equilibrium within three quarters. In the other side, it seems that in the case of Kuwaiti economy, the impact of the non-Oil GDP on financial development is limited to run only in the short term. The impulse response function shows that through one standards deviation positive shock in Credit provided to private sector, the non-Oil GDP will increase by average one standards deviation during the 10 coming years. We recommend reviewing banks’ credit portfolio to be more oriented for private companies by decreasing the credit for the households. This study provides the policy makers in Kuwait with the appropriate evidences to design their policies in fostering the non-resources sector.
Authors and Affiliations
Belhadia Abdellah| Senior Lecturer, AACSB Mentor, ACBSP Evaluator. Modern College of Business and Science Muscat, Oman abdullah.b@mcbs.edu.om, Belboub Nawal| PhD candidate Algiers University Assistant Lecturer Cihan University, Kurdistan Region, Iraq Atamkine@yahoo.co.uk
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