Effect of Private Banking Credit on Economic Activity: A Case Study of Yemen

Ghaleb Mushabeb


The study examines the effect of the private banking credit on economic activity in Yemen during the period 2000-2012, by using VAR model on quarterly data, Two variables are chosen for this study: real (GDP) as an important indicator for measuring the average of economic activity and private banking credit. Some major tests, such as: Johansen test, Granger causality test, variance decomposition analysis, and impulse response functions, were applied in this study.
The results of the study indicate that there is a mono effect relationship moving from the private banking credit to the GDP and a long-running equilibrium relationship between these variables. Results also indicate that there is little credit explanatory power for explaining the changes in the GDP. In general, the results show a positive effect of a Little private bank credit to the Yemeni economic activity.


Private Banking Credit, Economic Activity, Vector Auto-Regressive Model (VAR), Yemen.

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