Banking and Finance
264 theses under this subject heading
Financial Analysis of Wastewater Treatment Plant in Famagusta – North Cyprus
The aim of this study is to explore the unit cost of treated wastewater that farmers may be willing to pay per cubic meter for irrigation purposes in other to give up the use of underground water. For this, an appraisal for the wastewater treatment plant was undertaken using the cost-benefit analysis approach. The appraisal assesses solely the financial and sensitivity analysis to enable an efficient long term feasibility and sustainability of the wastewater treatment plant. The financial analysis conducted shows that the FNPV of the treated wastewater plant is positive and significantly large enough to generate high returns on investment for the municipality. Therefore, we can say that, the treatment plant project is feasible and it will be able to generate sufficient cash flows. Also, based on the sensitivity analysis results, it appears that the variables under observations are not sensitive enough to affect the FNPV of the project. At the end of this study, it was found that farmers in Gazimagusa – North Cyprus are paying higher for purifying wastewater (0.39 euros per cubic meter) when compared to what is obtainable by farmers in the South Cyprus (0.15 EUR per cubic meter) of treated wastewater.
The Macroeconomic Determinants of Credit Risk in the Banking Sector of Kyrgyzstan
Credit risk, i.e. the risk of loan default, is a significant risk faced by banks in every country. While banks make loans in order to generate income, by making loans they also face a risk of losing their principal and the interest. As part of their lending business, a small percentage of loan default (non-performing loans) is always expected. However, large volumes of loan defaults can push banks into bankruptcy and can cause financial instability in the banking sector. Therefore, it is important to know the factors affecting the credit risk, i.e. non-performing loans, in the banking sector. Especially in the newly established countries such as Kyrgyzstan, where most of the economic and financial policies are newly introduced and the banking sector is in its infancy, it is vital for the governments to understand the factors that increase the credit risk. This research uses the econometrics analysis to determine the macroeconomic factors that increase the credit risk in the banking sector of Kyrgyzstan. The findings indicate that real GDP growth rate, exchange rate of Som per US Dollar, corruption and the presence of political instability affect the credit risk in Kyrgyzstan. While GDP growth rate is negatively related with the credit risk, the exchange rate, corruption, and political instability are positively related with the same. The findings of this research suggest that in order to reduce the credit risk of banks and promote stability in the banking sector, the policy makers in Kyrgyzstan must promote political stability and economic growth, while the value of the local currency should be stabilized against US dollar. Furthermore the government must take actions to reduce high levels of corruption in the country. Keywords: NPLs, credit risk, banks, corruption, macroeconomy, Kyrgyzstan
Mature and Significant Link between Islamic & Conventional Banking
Basically a jointly shared goal of the banking system is to serve the humanity for their needs that leads towards their betterment of the persons individually, a family, vicinity, society and the economy of the countries as a whole. It is mutually consensus by the think tanks globally that the past experiences now paved the way to redesign the policies for economic development as this proved from the researches about Natural and Social Sciences. Currently banks are designing number of services to boost up the wellbeing of the populations in which they are operating.All these services/products are basically essentials to everyone’s routine life without any discrimination at all. Hence the banking industry are repeatedly trying to introduce distinct services/products in different ways to the earlier or existing ones for the future according to the requirement of their customers/societies needs that fulfills and satisfies them. However due to the proliferation of various types of Banks a common man who is believer of any revealed religion including Islam, Christianity and Judaism or any other is very much in a state of confusion. On one hand is the very cherishing dream of development while on the other hand is faith. So these developments lead to the question among the peoples over two kinds of Banks (Islamic and Conventional).I want to discuss that what are the similarities and differences between these if there are, and how big are these? Key words: inevitable, pivotal, sufficed, steeply proliferated, and bluntly refused.
Analysis of performance of sample microfinance institutions in Nigeria
ABSTRACT: This paper aims to analyze the performance of microfinance institutions (MFIs) from sustainability and outreach points of view. Random-effects GLS regression-Robust and Fixed-effects (within) regression- Robust analysis have been carried out employing a panel dataset of 64 MFIs in Nigeria. These MFIs willingly report their financial and operational data to Microfinance Exchange (MIX), a non-profit private institution with the objective of strengthening financial inclusion by disseminating performance information of microfinance sector worldwide. This study reveals that the MFIs will cover their cost without necessary increasing the number of loan officer for each borrower and the same time without increasing the number of female borrowers in their books. Also when the number of borrowers increases it is better for MFIs to increase their OSS. The result shows that PAR 30 will be properly checked and maintain with the increase of log of loan officer per borrower. The log of return on equity in our estimates shows significant when the MFIs ensures decrease in portfolio at risk past due 30 days and when CAR is getting down. Cost efficiency is significant when other variables are constant. The result depicts that the sample MFIs attain breadth of outreach while the cost per borrower reduces and lastly, for the MFIs to increase the depth of outreach PAR30 will also increase. Keywords: Microfinance Institutions, Operational Self-Sufficiency, Random-effects and Fixed-effects. …………………………………………………………………………………………………………………………………………………………………………………………………………
Determinants of Banks Capital Structure: Empirical Evidence on Listed Commercial Banks in Turkey
Existing literature provides sufficient evidences consistent or/and contradict of the available theories of capital structure. On the other hand, the choice of capital structure for the non-financial firms substantially varies from financial institution especially banks. This motivates enough for further studies in particular in a fast growing country such as Turkey. The present thesis empirically examines the choice of leverage of 9 listed commercial banks as the function of 4 bank characteristics namely profitability, tax shield, collateral and dividend. The present thesis uses panel OLS regression considering the robustness and diagnostic tests of the model. The findings suggest a very small but negative impact of the profitability on the capital structure of the sample banks implying a consistency with the pecking order theory. Tax shields effects were found to be insignificant. Surprisingly, the impact of collateral found to be negative and statistically significant. Finally, we report a positive but very weak association between the dividend and the choice of capital structure of the sample banks.
Determinants of Stock Return in BIST
In this study, we investigated the effect of macroeconomic variables on the volatility of Turkish stock market returns. We examined the effect of growth in gross domestic product, inflation, treasury bills rate, return on oil, exchange rate of major currencies against Turkish Lira, and contagion effect proxied for average of four major stock market returns most especially in United States, United Kingdom, Germany, and Japan. Using quarterly data from the periods 2002-2016, we carried out descriptive, correlation, and classical linear regression analysis. Empirical results show that there are three main determinants of Turkish stock market returns such as; return on oil, exchange rates, and contagion effect. Based on the results, we are of the opinion that, investors should speculate the fluctuations in oil price and monitor Turkish Lira against major currencies. Investors who are seeking international diversification benefits, especially through Turkey Lira should put into consideration impacts of contagion effect and other major stock market variables. Keywords: Turkish stock market, exchange rate, contagion effect
Internet Banking Services in Iran: An Exploratory Study of the Perceptions of Bank Management and Iranian Bank Customers
ABSTRACT: Fast growing industry of banking and the increased demand for bank services require a reliable infrastructure to meet the needs of customers through providing efficient services. Development of computer technology, especially the internet has made the banking industry offer services to customers in more efficient ways. This has been started by a majority of banks in Iran although customers are late in taking advantage of Internet Banking (IB) services. This thesis reports the findings of an exploratory study concerning the current situation of IB in Iran from the perspective of Iranian bank managers and customers. Ten out of eleven banks surveyed indicated that they offered IB services in order to increase customer satisfaction and to gain a competitive edge. From the customers` perspective, less than half of the respondents used IB - mainly to pay bills or transfer money between accounts. More than half of the respondents were not satisfied with IB services. Those who did not use IB services reported that the main reasons were security concerns and lack of Information Technology (IT) knowledge. Based on these findings, recommendations for Iranian banks and their management are presented and a need for a more comprehensive in the Iranian banking sector is mentioned. Keywords: Internet banking, Bank customers, Bank managers, Adoption, Iran. ……………………………………………………………………………………………………………………………………
Adoption of Mobile Banking in Northern Cyprus
ABSTRACT: The subject of this thesis is to search on mobile banking adoption in the case of North Cyprus. This research was conducted in order to understand what kind of individuals’ background has a significant effect on the adoption of mobile banking. Mobile banking is defined as the financial transactions that can be done through wireless devices such as smart phones, Personal Digital Assistants (PDAs) and other wireless devices. In order to understand the influential factors of users acceptance a survey was implemented among various nationalities with different age groups in North Cyprus. It hopes that this research not only helps the managers of banking industry in North Cyprus to make better decision in their further marketing plan, it will help other managers in similar industries and other countries which have similar conditions to North Cyprus. The findings of this thesis demonstrate that among 60% of respondents have been using mobile banking for 1 to 5 years. Among these people of different nationalities mobile banking was perceived as a useful tool for conducting banking transactions. In contrast, the result showed that different age groups have different perceptions of mobile banking usefulness. Finally, males and females perceived that suggesting this service to their environment may differ. In accordance to the result of mean scores analysis, it proved that the most important influential factors are perceived usefulness, perceived ease of use, and social norms. Keywords: Mobile Banking (MB), Adoption, Northern Cyprus. …………………………………………………………………………………………………………………………
Determinants of Commercial Banks’ Lending Behavior in South Africa
This study is carried out to investigate the factors that determine commercial banks’ lending behavior in South Africa. The model used for this study is summarized in South African commercial banks loans to total assets as the dependent variable and other predictor variables such as credit risk, equity risk, liquidity risk, management efficiency, and GDP growth for the period: 2007-2014. Using the panel data model and regression analysis, this research investigates if any relationship exists between the dependent variable and the specified independent variables. Also, it investigates the significant effect of these independent variables to the South African commercial banks’ lending decisions. This study discovered that the predictor bank specific and macroeconomic variables used were significant at alpha level 1% and 10% and influences banks’ lending behavior. In addition, credit risk, equity risk and management efficiency all have a positive significant influence whilst GDP growth and liquidity risk both have a negative significant impact on commercial banks’ decision to lend in South Africa. Keywords: Commercial banks, credit risk ratio, determinants of commercial banks’ lending, GDP growth, South Africa.
Determinants of capital structure: UK panel data
ABSTRACT: The paper investigates capital structure determinants of 5 important non-financial firms listed in FTSE100. The firms are chosen from oil and gas and mining industry. The period chosen for the study is 22 years from 1990 to 2012. Firms are chosen according to capitalization in market. Theories in capital structure such as the trade-off theory, pecking order theory and agency theory are described in order to find the best possible formulation to predict the choice of capital structure in firms. This study has chosen panel data to perform regression analysis with fixed effects estimation model. The variables chosen for this study are total debt ratio, profitability, growth, non debt tax shield, liquidity, tangibility and size. The results have shown that the findings in this study are according to previous studies. The empirical results show that liquidity, profitability and size are the variables which can cause changes in total debt ratio of firms. It is concluded that the further directions for future studies could be choosing more firms take into consideration the other theories of capital structure. This study has used total debt ratio, while long term debt ratio and short term debt ratio could also be useful to analyze firms and obtain more detailed results. Key Words: Capital Structure, Determinants of Capital Structure, Capital structure in FTSE, capital structure in oil and gas industry …………………………………………………………………………………………………………………………………………………………………………………………………………
Determinants of Financial Development in South Africa: The Role of Monetary Policy and Rule of Law
The aim of the thesis is to investigate the determinants of financial development for the case of South Africa between the period of 1996-2017 by adopting quarterly data. Johansen Cointegration test results suggest that there is a long run relationship among financial development, monetary policy, foreign direct investments (FDI), stock market capitalization, economic growth, and rule of law. Fully modified ordinary least squares (FMOLS) regression results indicate that monetary policy, rule of law, economic growth, FDI, and stock market capitalization have positive impacts on financial development. Results of the thesis reveal that monetary policy, FDI, stock market capitalization, economic growth and rule of law are the long run determinants of financial development in South Africa. This thesis can be a guideline for other emerging countries to create effective policies around financial development. Keywords: Financial development, rule of law, monetary policy, South Africa.
Evaluating the Performance of Public, Private and Foreign Banks Operating in Turkey
This study attempts to compare the financial performance of public, private and foreign banks operating in Turkey from 1997 to 2010, as well as conducts a pre and post global financial crisis performance analysis for public, private and foreign banks. The following profitability proxy indicators were used; Return on Assets (ROA), Return on Equity (ROE), Profit per Employee (PPE), Profit per Branch (PPB), Net interest Margin (NIM) and Growth in Net Profit (GINP). For this purpose, data of three public, three private and three foreign commercial banks were used. There were not significant differences of profitability among public, private and foreign banks before and after 2008. However, there is a significant difference in Net interest Margin before and after 2008 global financial crisis which shows that the financial crisis has affected the interest income of banks. On the other hand, other profitability indicators appear to remain unchanged after the global financial crisis. This indicates that banks compensated their decreased interest earnings with an increased income from financial services such as fees, commissions and other income. Keywords: Bank profitability, state banks, private banks, foreign banks, Turkey.
Financing and risk management of investments in mining sector
ABSTRACT: This study aims for investigating the process of mining investments and calculating the level of risk to which mining companies are exposed. As a mining firm gets involved in a project, there are many risks to be assessed including environmental, social and reputational risks. Therefore, the presence of a sustainable development framework in the mining sector helps to consider all dimensions of mining projects in order to mitigate the risk exposure. As undeveloped mineral resources are mostly located in the jurisdictions with high levels of risk, project finance is often the preferred financing strategy in the mining investments. In addition, the host country where all the key players of project financing are involved in the related activities plays an important role in the appraisal and risk assessment of the mining projects. Since it is not possible to investigate the mining sector in a single study, the gold mining firms are chosen as the target of this study. In this respect, top five gold mining companies are identified. Then, in order to address country risks affecting project financing of these firms’ properties in different countries, this study suggests a methodology in which risk scores are calculated. These risk scores evaluate four basic categories of risks: political, commercial, technical and legal. A calculated risk score is comprised of surveys and rankings that are most relevant to the four risk categories. Results show that the production percentage and the risk score of the host country in each category are important factors to the overall risk exposure of these gold mining companies. In addition, higher risk scores are associated with less risky jurisdictions and vice versa. These findings could be as the first step in the appraisal of mining investments by financiers. Keywords: Gold Mining Firms, Project Finance, Political Risk, Legal Risk, Technical Risk, Commercial Risk, Risk Scores. …………………………………………………………………………………………………………………………………………………………………………………………………………
Determinants of Foreign Direct Investment in Germany
ABSTRACT: Foreign direct investment is defined as the investment made by a firm or an individual or an entity based in local country, into a firm, or entity based in another country (Dunning, 1977). This thesis aimed to analyze the determinants of FDI in one of the most powerful economics at the world; Germany. The period chosen for the study was January 1985 – December 2013. The variables chosen for this study were foreign direct investment, effective exchange rate, real GDP, interest rate, inflation, labor cost, import and export. To analyze the obtained data on each variable, various approaches were introduced. To investigate the determinants of FDI, gravity model was considered to be the most accurate and helpful approach (Egger, 2003). Hence the current study used the gravity model to implement the methodology. Two different equations were used to evaluate the financial and economical determinants of FDI separately. The first model described changes in FDI according to the changes in financial factor and the second model took the macroeconomic factors into consideration. The results of unit root tests revealed that the data was stationary at first level. After this test Vector Error Correction model and Johansen Co-integration tests were applied. Results on these analysis showed that variables chosen for study were insignificant in the short run and it could be said that they did not have any short run association to foreign direct investment. On the other hand, in the long run, all variables except inflation could not significantly affect the amount of FDI in Germany. Results showed that FDI in Germany was likely to be under the effect of changes in both economic and financial factors. However, economical factors tended to make more changes in FDI level in Germany. Keywords: Foreign direct investment (FDI), Vector Error Corection Model (VECM), Johansen co-integration, Germany. …………………………………………………………………………………………………………………………
Interactions between Financial Sector Development, Foreign Direct Investment, and Economic Growth in Japan!
ABSTRACT: The aim of this study is to analyze the relationship between financial development, foreign direct investment, and economic growth in Japan by using time series annual data. Results show that financial sector and foreign direct investment in Japan have a long term and significant impact on economic growth. Real income significantly converges to its long-term equilibrium path through financial sector and foreign direct investment. Furthermore, real income growth also exerts statistically significant and positive impact on financial development in Japan while foreign direct investment does not. Keywords: Financial Development; Foreign Direct Investment; Economic Growth; Error Correction Model. ……………………………………………………………………………………………………………………………………………………………………………………………………………………
Interactions between Business Conditions and Financial Performance of Airlines in Top Ranking Tourism Destination Countries: an Empirical Investigation from Panel Data Analysis
ABSTRACT: This thesis focuses on investigations the role of real income and industry sector on stock price movements in important airline companies around the world. Panel data analysis has been employed with this respect. Results of the thesis prove that economic growth and industrial growth exerts statistically significant impact on stock price movements of international airline companies. Stock prices converse to long term path by 4.10 percent through macroeconomic activity and business conditions. Keywords: Stock Prices; Business Conditions; Panel Data Analysis; Error Correction Model. ……………………………………………………………………………………………………………………………………………………………………………………………………………………
Determinants of Profitability of Listed Commercial Banks: A Case of China
The method least square panel was adopted to analyze the determinants of profitability of 16 listed commercial banks in China, from 2010 to 2015. As found by the study, the profitability of listed banks is associated not only with the characteristics taken on by banks, but also with how the financial markets are structured. More evidently, the Non-performing loan losses ratio, reserve rate, and equity ratio are negatively correlated with the profitability. Markedly, Herfindal- Hirschman Index, X-Efficiency, Non-interest rate and profitability were positively correlated with each other. The z-score and profitability are not evidently positively correlated. To improve their profitability, China's listed commercial banks are required to facilitate their operation, control operating costs, increase efficiency, and further reduce the NPL ratio.
Determinants of profitability in domestic and foreign banks in Turkey
ABSTRACT: The most important instrument of financial system for the future of the economy is the profitability of banking sector. The goal of this research is to determine the specific bank factors that impact the profitability of 14 commercial banks in Turkish banking sector for the period of 2005-2011. The data are collected into two groups: Privately owned domestic and foreign Banks. Profitability measures are the operation of specific of bank that used to measure the bank performance. The bank specific determinants that effect the profitability are equity/total assets, total loans/total assets, interest income/interest expense, liquid assets/total assets, total assets and interest expense/deposit. Keywords: Profitability, Turkish, Banking. …………………………………………………………………………………………………………………………
Evaluating profitability and efficiency of bank performance in Palestine
ABSTRACT: Nowadays, the role of banks in economics is undeniable. All the financial activities are depending on them because they help to develop the economy quickly, so the profitability measurements of the banking system should be investigated. The goal of this study is to find the profitability measurements for 7 commercial Palestinian banks and the researcher will do that on an analysis of bank for the period 2005-2011. The Palestinian banks profitability will be done by evaluating two main parts of ratios; the first one is the bank specific ratios which are capital adequacy ratio, liquidity ratio, management efficiency ratio, and the last one is the asset quality ratio. In addition, the second part is macroeconomic determinants (inflation and interest rate). In this research, panel data is used to evaluate the relationship between the variables. The study followed the previous studies such as the case of Turkey (Alper and Anbar, 2011) that investigated the profitability to measure the bank –specific performance for 10 commercial banks for the period of 2002-2010 and they came out that there is a positive relationship between the interest rate and profitability and this result agrees with the statistical analysis for of this study’s case. The study concluded that the macroeconomic factors have more impact to the profitability of the banks in Palestine when compared to the bank specific determinants that exist because of the special structure of each bank, so for that the researcher concluded the study by suggesting some solutions to the problems faced in this study. Keywords: Palestine, panel data, bank profitability, macroeconomics factor, bank specific determinants. …………………………………………………………………………………………………………………………
Dividend Payouts: Majority Control and Rent Extraction
In Eurasia, Turkey has a “crony” capitalist system with majority control and business groups (BGs) in the hands of a few families. These business groups are often organised around a holding company. Turkey has adapted French civil law which offers a good setting to understand the dividend policies of majority controlled companies dealing with the principal-principal conflict in a weak investor protection setting. We analyse the dividend payouts of family controlled Borsa Istanbul companies, which are affiliated to holding and non-holding BGs. We use a panel data random-effects Tobit estimation methodology for a period of eight years (2010- 2017). We investigate and quantify the effects of several control-enhancing mechanisms (CEMs) on dividend payouts. We use precise quantitative proxies for CEMs to measure the divergence between control and ownership rights. Supporting the rent extraction hypothesis, holding business group companies have lower dividend payouts as the divergence between control and ownership rights widens and the pyramid wedge increases. However, controlling foreign-family coalitions in holding business group companies curb the rent extraction problem by having a positive effect on the dividend payouts. Overall, for family controlled holding BG companies, the effects of company-specific financial control variables on dividend payouts are stronger than the effects of CEMs. For family controlled non-holding BG companies, there is no empirical support for either the rent extraction or the reputation building hypotheses. The company-specific financial control variables are the main determinants of dividend payouts for family controlled non-holding BG companies. The empirical findings of this study have implications such as higher expropriation risk for minority shareholders, portfolio managers and investors of family controlled holding BG companies in a low investor protection setting. The results show that there is a need for further policy actions to strengthen the rights of minority shareholders to limit rent extraction by the controlling families.
A Comparaison of Different Banking Systems? Performance During Global Crisis: Conventional vs Islamic Banking
ABSTRACT: Though overall bank performance from 2007 to 2009 was the worst since at least the Great Depression, there is significant variation in the cross-section of banks performance across the world during that period. More specifically this study is going to investigate the performance of islamic and conventional banks during crisis by looking at 20 different banks from 4 diffrent countries. As we know banks that the market favored in 2006 had especially poor returns during the crisis. This study tests the performance of banks that belongs to two different sectors: a) Islamic Banks (IBs) and b) Conventional Banks (CBs). The study concentrates on the pre and post 2007 financial crisis with an aim to test if there are any significant differences in performance between the two sectors. Though canadian banks did not go bankrupt we provide some evidence that capital adequacy ratio has a significant impact on bank profitability in conventional banks. Moreover, we also found out that regulation does not affect islamic banks but management efficiency does. The reason why conventional banks were touch from the recession is because some banks that aim to maximize shareholders wealth before the crisis took some risks that were understood to create shareholder wealth, but were costly ex post because of outcomes that were not expected when the risks were taken. Another important point is that some of the financial crises derive from a human error but not from the regulation or governance. ……………………………………………………………………………………………………………………………………………………………………………………………………………………
Customer Perception towards the Internet Banking Services Performed by the Turkish Banking System
ABSTRACT: The aim of this study is to investigate the customer perception towards the internet banking services and to identify the main factors affecting the usage of internet banking in Turkey. For that purpose, six hypotheses have been employed for the research methodology. Questionnaire has been prepared and conducted a survey in Izmir for the fieldwork. Out of all the surveys collected, 245 were usable and were compiled with SPSS 18.0. The finding of the study indicated that factors of cost, ease of use, security, accesibility were statistically significant and have positive effects on customer satisfaction. However, awareness factor has no effect on customer satisfaction of internet banking. As a result of the analysis, it is found that education levels affect the usage of the internet banking services in Turkey. Keywords:Internet banking, customer satisfaction, customer perception. …………………………………………………………………………………………………………………………
Examining the Effects of Remittances, Labor Productivity and Trade on Real Effective Exchange Rate: Case of Turkey
Financial and economic development of a country is a crucial matter for every nation. There are various factors and elements that carry a major role in this regard and the literature shows numerous variables that are regarded as vital for this improvement. However, most studies examined countries in regions that are relatively far from the Middle East and Especially, Turkey. Hence, the current research entails a number of influential factors that have been noted to be significant for improving real effective exchange rate of the country, especially in the long-term. It is assumed that changes in Remittances, Labor Productivity, Trade (Openness) could impact on the changes in Real Effective Exchange Rate in the context of Turkey. These factors are remittances, labor productivity, and trade openness. It is important to note that while these factors have been under examination since early ages of research on econometric variables, the literature lacks consensus upon findings, particularly, empirical evidence. Thus, the current research aims to provide a better understanding of underlying effects and linkages among these variables. Data (2000-2017) from central bank of Turkey that was made public is used as well as indicators of OECD. Modern tools and analytical approaches have been undertaken to examine the relationships between the included factors and measures have been derived from the extant literature to ensure the reliability and validity of the results. All hypotheses of the research have been supported through data analysis. It can be said that increased remittances have a positive effect on a country’s real effective exchange rate in long-term. Increased trade openness was found to be negatively associated with REER. This is due to the fact that trade openness leads to increased price of domestic goods for other nations. Labor productivity is positively related with REER as Turkey exhibits high productivity in its labor, which further impacts its economic state in terms of effectiveness of its exchange rate. The findings of this research are aimed to contribute to the literature as well as practical approach towards analyzing and understanding connections among the aforementioned variables. Keywords: Real Effective Exchange Rate, Remittance, Labor Productivity, Trade Openness, Turkey, Economics.
The Relationship between Inflation, Bank Credit, and Economic Growth: The Case of Uganda
This thesis explores the relationship among inflation, bank credit, and economic growth in the case of Uganda using data obtained from the World development indicators from 1983- 2015. The variables used are Gross Domestic Product for economic development, consumer prices as the annual percentage of the GDP for inflation rates and domestic credit to the private sector by banks for bank credit. The thesis applies the unit root tests (Augmented Dickey-Fuller, Phillips – Perron and the Kwiatkowski–Phillips–Schmidt–Shin test) to test the stationarity of the variables, cointegration test to investigate the long run relationship between the variables, Vector Error Correction Model (VECM) to determine the short run and long-run relationship and lastly the Granger causality to determine the direction of Inflation, Bank credit and Economic growth. VECM results indicate a negative long-run relationship between inflation and economic growth and also a long run negative relationship between bank credit and economic growth in Uganda. This adds to the available literature on the study of inflation, bank credit and economic growth in the world and its uniqueness in the results of the negative relationship between bank credit and economic growth which is a rare case. Also, the results would enable the policymakers in Uganda to make the right decisions to enable the development of the country as well as ensure that the negative relationship between bank credit and economic growth does not adversely affect the country‟s economy. Keywords: Inflation; bank credit; economic development; Uganda