Browsing by Author "Endashaw Megersa"

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    The Long Run Impact of Government Domestic Borrowing on Bank Credit to the Private Sector in Ethiopia
    (Addis Ababa University, 2014-06) Endashaw Megersa; Admassie Assefa
    Motivated by the heavy government reliance on domestic banks credit over the last couple of years in Ethiopia, the current paper attempted to empirically test its longrun impact on private sector credit employing the tools of cointegrated VAR model. The paper used quarterly data ranging from QI 1999 to QIV 2013 E.F.Y. to chiefly explore the longrun impact of both bank credit financed government deficit and bank credit directed to the public sector on private sector credit. Arguing against the classical “interest rate transmission channel” for the Ethiopian case, and hence introducing the channel of credit i.e. availability of credit, the paper generated some important findings. Bank credit directed to the public sector reports a significant and positive longrun effect on private sector credit over the period of study. As such a 1 birr permanent increase in bank credit to the public sector is associated with a 0.40 cents growth in bank credit to the private sector supporting the crowding in effect hypothesis. The effect is stronger when we account for endogeneity of gross domestic product and bank credit financed government deficit (about 0.47 cents growth in bank credit to the private sector). Gross domestic product and bank credit financed government fiscal deficit coefficients, on the other hand, reports a positive but insignificant longrun effect on private sector credit.