An examination of the causal relationship between bank lending and economic growth: evidence from ASEAN

Abstract

The concern of this paper is to investigate the direction of causality relationship between bank lending and economic growth for the five ASEAN founding economies, namely Malaysia, Singapore, Indonesia, Thailand and the Philippines. The study has adopted time series approach, Granger causality test to examine the demand-follo wing hypothesis (economic growth causes bank lending), and supply-leading hypo thesis (bank lending causes economic growth). The empirical results show that the supply-leading hypothesis is supported by Thailand data, and the demand-following hypothesis is evidenced by Singapore. Other countries (Malaysia, Indonesia, and the Philippines) fail to support neither supply-leading hypothesis nor demand-following hypothesis. JEL Classification: C51, 011, 057

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