Preprint Article Version 1 This version is not peer-reviewed

The Contribution of Commercial Banks to GDP Growth in Nigeria Using Autoregressive Distributed Lag Model

Version 1 : Received: 16 January 2019 / Approved: 21 January 2019 / Online: 21 January 2019 (10:02:52 CET)

How to cite: Adenomon, M.O.; Ogujiofor, G.O.; Adenomon, C.A. The Contribution of Commercial Banks to GDP Growth in Nigeria Using Autoregressive Distributed Lag Model. Preprints 2019, 2019010204 (doi: 10.20944/preprints201901.0204.v1). Adenomon, M.O.; Ogujiofor, G.O.; Adenomon, C.A. The Contribution of Commercial Banks to GDP Growth in Nigeria Using Autoregressive Distributed Lag Model. Preprints 2019, 2019010204 (doi: 10.20944/preprints201901.0204.v1).

Abstract

In most econometrics literature, the Autoregressive Distributed Lag (ARDL) model is often applied in many economic analyses to study short and long run relationships. This is because ARDL model can deal with economic variables that are integrated of different order (I(0), I(1) or combination of both) and also it is robust where there is single long-run relationship between the underlying variables in a simple sample size. This study applied the ARDL model to examine the contributions of commercial Banks to GDP growth in Nigeria. To achieve this, annual data covering 1981 to 2015 for loans and advances, savings, lending rates and GDP of Financial Institutions were collected from CBN bulletin. The ADF test revealed that the variables are I(1) except for lending rate which was of I(0) order. The ARDL(1,1,1,2) model revealed that loans and advances, and lending rates are significantly positively related to GDP in Nigeria but savings was not significant in the model. The model revealed some evidence of short run relationships while the ecm(-1) was -0.6156 (P-value=0.0038<0.05) which means that the rate of the speed of adjustment to equilibrium is 61.56% annually. The estimated model is free from serial correlation, multicollinearity, heteroscedasticity while the model is stable and the residuals are normally distributed. The study recommends that savings and savings culture should be encouraged in Nigeria since economic theory states that savings and investment are related in any economic development.

Subject Areas

gross domestic product (GDP); lending rates; savings; loans and advances; ARDL

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