Does banking sector performance promote economic growth? Case study of Jordanian commercial banks

  • Received February 10, 2017;
    Accepted March 13, 2017;
    Published June 7, 2017
  • Author(s)
    Ayman Mansour Khalaf Alkhazaleh
  • DOI
    http://dx.doi.org/10.21511/ppm.15(2).2017.05
  • Article Info
    Volume 15 2017, Issue #2, pp. 55-64
  • TO CITE АНОТАЦІЯ
  • Cited by
    18 articles
  • 2335 Views
  • 1762 Downloads

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License

Spurred by the need to evade possible parameter bias associated with earlier works, this study intended to address the subject of whether performance of commercial banking contributes to economic growth. With the aim of answering this question, the present review concentrates on analyzing the association between profitability, deposit and credit facilities as proxy for performance of commercial banks while gross domestic product proxies economic growth. The population of the study is characterized by the Jordanian banking industry; the study enclosed a period of six years from 2010 to 2015 constructed on the annual report of thirteen chosen banks. Using Ordinary Least Square, the regression outcomes found a significant positive association between measures of bank performance and economic growth. Findings demonstrate that measures of bank performance in particular profitability deposits credits have positive relationship with economic growth as measured by GDP. The empirical results suggest that the policy creators should make arrangements to augment and prompt the banking sector in Jordan on account of its key significance in making and advancing development of the economy. It additionally can be inferred that not only commercial banking performance but also other movables such as political stability and technology may assume essential part in the economic prosperity in Jordan.

view full abstract hide full abstract
    • Figure 1. Conceptual Framework
    • Table 1. Descriptive statistics
    • Table 2. Variance Inflation Factor Test
    • Table 3. Results of OLS
    • Adamopoulos, A. (2010). Financial development and economic growth an empirical analysis for Ireland. International Journal of Economic Sciences and Applied Research, 1, 75-88.
    • Ahmad, E., & Malik, A. (2009). Financial sector development and economic growth: An empirical analysis of developing countries. Journal of Economic Cooperation and Development, 30(1), 17-40.
    • Akpansung, A. O., & Babalola, S. J. (2012). Banking Sector Credit and Economic Growth in Nigeria: An Empirical Investigation. CBN Journal of Applied Statistics, 2(2), 51-62.
    • Balago, G. S. (2014). Financial sector development and economic growth in Nigeria: An empirical investigation. International Journal of Finance and Accounting, 3(4), 253-265.
    • Bangake, C., & Eggoh, J. C. (2011). Further evidence on finance-growth causality: A panel data analysis. Economic Systems, 35(2), 176-188.
    • Ben Salem, J. B., & Trabelsi, M. (2012). More on finance and growth in the MENA region: more growth, more finance. Middle Eastern Finance and Economics, 17, 113-124.
    • Dewett, K. K. (2005). Modern Economic Theory. Shyam Lal Charitable Trust, New Delhi, India.
    • Egbetunde, T., & Mobolaji, H. I. (2010). An Empirical Analysis of Causality Between Financial Development Economic Growth: Further Evidence from Sub-Saharan Africa. Journal of Economics Theory, 4(2), 50-58.
    • Emecheta, B. C., and Ibe, R. C. (2014). Impact of Bank Credit on Economic Growth in Nigeria: Application of Reduced Vector Autoregressive (VAR) Technique. European Journal of Accounting Auditing and Finance Research, 2(9), 11-21.
    • Fadare, S. O. (2010). Recent banking sector reforms and economic growth in Nigeria. Middle Eastern Finance and Economics, 8, 1450-2889.
    • Ogwumike, F. O., & Salisu, A. A. (2012). Financial development and economic growth in Nigeria. Journal of Monetary and Economic Integration, 12(2), 91-119.
    • Francis, J., LaFond, R., Olsson, P., & Schipper, K. (2005). The market pricing of accruals quality. Journal of accounting and economics, 39(2), 295-327.
    • Greenwood, J., Sanchez, J. M., & Wang, C. (2013). Quantifying the impact of financial development on economic development. Review of Economic Dynamics, 16(1), 194-215.
    • Gregory, A. W., & Hansen, B. E. (1996). Residual-based tests for cointegration in models with regime shifts. Journal of econometrics, 70(1), 99-126.
    • Gujarati, D. N. (2005). Sangeetha (2007). Basic econometrics, 4, 304-331.
    • Jhingan, M. L. ( 2006). The Economic of Development and Planning. 38th Edn., Virnda Publication (P) Ltd., Delhi.
    • Kar, M., Nazlıoğlu, Ş., & Ağır, H. (2011). Financial development and economic growth nexus in the MENA countries: Bootstrap panel granger causality analysis. Economic modelling, 28(1), 685-693.
    • Kenza, M., & Eddine, G. N. S. (2016). The Effect of the Financial Sector development on Growth: The case of the MENA Countries. Arab Economic and Business Journal, 11(1), 72-85.
    • Korkmaz, S. (2015). Impact of bank credits on economic growth and inflation. Journal of Applied Finance and Banking, 5(1), 51.
    • Lequiller, F. (2001). The new economy and the measurement of GDP growth (No. g2001-01). Institut National de la Statistique et des Etudes Economiques, DESE.
    • Mazelliu, M., & Zogjani, J. (2015). Impact of Financial Sector on Economic Growth: Evidence from Kosovo. Mediterranean Journal of Social Sciences, 6(6 S4), 315.
    • Neba Cynthia (2008). Assessing the role of Micro Finance Institutions on Economic Growth in Cameroon. Unpublished.
    • Ochejele, J. J. (2007). Economic Analysis. Ichejum Press, Jos.
    • Olowofeso, E. O., Adeleke, A. O., & Udoji, A. O. (2015). Impact of private sector credit on economic growth in Nigeria. CBN Journal of Applied Statistics, 6(2), 81-101.
    • Oluitan, R. (2009).
    • Oluitan, R. O. (2012). Bank Credit and Economic Growth: Evidence from Nigeria. International Business and Management, 5(2), 102-110.
    • Onuorah, A. C., & Ozurumba, B. A. (2013). Bank credits: An aid to economic growth in Nigeria. In Information and Knowledge Management, 3(3), 41-50.
    • Ray, S. (2013). Does Financial Development Promote Economic Growth in India? International Journal of Economic Practices and Theories, 3(3), 140-151.
    • Rehman, W. U., Chaudhary, A. R., Rehman, H. U., & Zahid, A. (2011). Intellectual capital performance and its impact on corporate performance: An empirical evidence from MODARABA sector of Pakistan. Australian journal of business and management research, 1(5), 8.
    • Shittu, A. I. (2012). Financial intermediation and economic growth in Nigeria. British Journal of Arts and Social Sciences, 4(2), 164-179.
    • Todaro, M. P., & Smith, S. C. (2006). Economic Development. 9th Edn., Pearson Education Ltd., England.
    • Yakubu, Z., and Affoi, A. Y. (2014). An Analysis of Commercial Banks’ Credit on Economic Growth in Nigeria. Current Research Journal of Economic Theory, 6(2), 11-15.
Related Articles

  • Impact on poverty and income inequality in Malaysia’s economic growth

    Rabiul IslamORCID Researcher ID, Ahmad Bashawir Abdul Ghani , Irwanshah Zainal Abidin , Jeya Malar Rayaiappan doi: http://dx.doi.org/10.21511/ppm.15(1).2017.05
    Problems and Perspectives in Management Volume 15, 2017         Issue #1         pp. 55-62 Views: 11915 Downloads: 5693 TO CITE АНОТАЦІЯ

    Poverty and income inequality are extreme issues that still exist in Malaysia. Any rise in poverty and income inequality definitely affect economic growth. There are many great efforts taken by the government of Malaysia to eradicate poverty and to reduce the gap of income inequality which occurs since 1970’s. The incidence of poverty and income inequality is higher in rural areas compared to urban areas. This paper is mainly to study the level of poverty and income inequality in Malaysia together with government intervention to develop Malaysia’s economic growth. The research is focused among the working people at Ipoh, Perak. In this paper, questionnaire forms are being distributed to get information regarding the issue of poverty and income inequality. It also looks into the strategies taken by the government of Malaysia to eradicate poverty and income inequality. Few recommendations are given in terms of education policy, financial aid and assistance from government and non-government organization (NGO) to upgrade the standard and quality of living among the poor and lower-income group of people.

  • Impact of inflation on economic growth: evidence from Nigeria

    Anthony Olugbenga AdaramolaORCID , Oluwabunmi Dada doi: http://dx.doi.org/10.21511/imfi.17(2).2020.01
    Investment Management and Financial Innovations Volume 17, 2020         Issue #2         pp. 1-13 Views: 9131 Downloads: 5463 TO CITE АНОТАЦІЯ

    In an attempt to examine the influence of inflation on the growth prospects of the Nigerian economy, the study employs the autoregressive distributed lag on the selected variables, i.e. real gross domestic product (GDP), inflation rate, interest rate, exchange rate, degree of economy`s openness, money supply, and government consumption expenditures for the period 1980–2018. The study findings indicate that inflation and real exchange rate exert a significant negative impact on economic growth, while interest rate and money supply indicate a positive and significant impact on economic growth. Other variables in the model depict no influence on the economic growth of Nigeria. The causality result shows the unidirectional relationships between interest rate, exchange rate, government consumption expenditures and gross domestic product. However, inflation and the degree of openness show no causal relationship with gross domestic product. As a result, the study recommends that a more pragmatic effort is needed by the monetary authorities to target the inflation vigorously to prevent its adverse effect by ensuring a tolerable rate that would stimulate the economic growth of Nigeria.

  • Formalization of the impact of imbalances in the movement of financial resources on economic growth of countries in Central and Eastern Europe

    Serhiy KozmenkoORCID , Maxim KorneyevORCID Researcher ID doi: http://dx.doi.org/10.21511/afc.01(1).2017.06
    Accounting and Financial Control Volume 1, 2017         Issue #1         pp. 48-58 Views: 7874 Downloads: 1375 TO CITE

    The article deals with the impact of financialization on economic growth in countries of Central and Eastern Europe. It determinesthe impact of imbalances in the movement of financial resources caused by financialization on economic growth of these countries. It proves that the implementation of measures aimed at increasing the openness of the economy and maintaining solvent demand have a positive impact on economic growth of the surveyed countries in the long run. It also proves the importance of developing a set of measures of strategic nature regulating imbalances in the movement of financial resources caused by financialization.

Download Preview
Close
Problems and Perspectives in Management
Problems and Perspectives in Management