DOES BANK PROFITABILITY PROMOTE ECONOMIC GROWTH AND VICE VERSA? PANEL CAUSALITY EVIDENCE FROM THE SELECTED COUNTRIES

Yıl 2020, Proceedings of The Third Economics, Business And Organization Research (EBOR) Conference, 105 - 115, 31.12.2020

Fatih Ceylan Işıl Erem Ceylan

Öz

Banks, which have an important role in the country economies, increase the amount of savings and capital accumulation by bringing together those who supply and demand funds in the economy, and this increase contributes positively to economic growth and employment through the resource transfer function of banks. The ability of banks to function properly depends largely on their profitability levels, and banks with desired profitability levels are expected to have a positive effect on economic growth. Therefore, it is important to conduct more empirical studies in terms of determining the profitability of banks and the relationship between this profitability level and economic growth, which are of vital importance in national economies. At this point, the purpose of this study is to determine the causal relationship between bank profitability and economic growth across eight selected countries, including Argentina, Brazil, Chile, Croatia, India, Poland, Russia, and Turkey. Panel causality test is applied to examine the so-called causality relationship by considering the period of 2009-2018. The empirical findings have shown that bank profitability in the selected developing countries (Chile, Poland, Turkey and Russia) promotes the economic growth. To the best of our knowledge, this study provides an in-depth insight into by considering several countries and using panel causality test to study the relationship between bank profitability and economic growth.

Anahtar Kelimeler

Bank Profitability, Economic Growth, Panel Causality

Kaynakça

• Alev, N. (2018). ‘Profitability of the activity bank found in Turkey banking system and economic growth’, ASSAM International Refereed Journal, 5 (12), pp. 32-43.
• Breush, T. & Pagan, A., (1980). ‘The Lagrange multiplier test and its applications to model specification in econometrics’. Rev. Econ. Stud. 47, pp. 239–253.
• Demirguc-Kunt, A. & Huizinga, H. (1999). ‘Determinants of commercial bank interest margins and profitability: some international evidence’, The World Bank Economic Review, 13(2), pp. 379-408.
• Dumitrescu, E.-I. & Hurlin, C., (2012). ‘Testing for granger non-causality in heterogeneous panels’, Economic Modelling, 29, pp. 1450–1460.
• Emirmahmutoglu, F. & Kose, N., (2011). ‘Testing for granger causality in heterogeneous mixed panels’, Economic Modelling, 28, pp. 870-876.
• Granger, C.W.J., (1969). ‘Investigating causal relations by econometric models and cross spectral methods’, Econometrica, 37 (3), pp. 424-438.
• Hadri, K. & Kurozumi, E. (2012). ‘A simple panel stationary test in the presence of serial correlation and a common factor’, Economics Letters, 115, pp. 31-34.
• Isik, S. & Kambay, M. (2019). ‘Bank-specific and macro-economic determinants of profitability of Turkish commercial banks’, The Banks Association of Turkey, Bankers Journal, 110, pp. 3-24.
• Javid, M. E. (2016). ‘Bank specific and macroeconomic determinants of bank profitability’, Journal of Management Info, 3 (2), pp. 14-18.
• Klein, P-O. & Weill, L. (2019). ‘Bank profitability and economic growth’, BOFIT Discussion Papers, 15, pp. 1-41.
• Moussa, M. A. B. & Hdidar, Z. (2019). ‘Bank profitability and economic growth: evidence from Tunisia’, European Journal of Economic and Financial Research, 3 (4), pp. 81-96.
• Obamuyi, T. M. (2013). ‘Determinants of banks’ profitability in a developing economy: evidence from Nigeria’, Organizations and Markets in Emerging Economies, 4 (2), pp. 97-111.
• Ozturk, H. (2016). ‘A n empirical analysis of macroeconomic factors affecting Turkish banking sector’, Finance Politic and Economic Comments Journal, 53 (620), pp. 11-29.
• Parasiz, I. (2000). Money, banking and financial markets. 7th edition, Bursa: Ezgi Publishing. Pesaran, M. H. (2004). ‘General diagnostic tests for cross section dependence in panels”, Center For Economic Studies’, Institute for Economic Research, Working Paper No: 1229.
• Pesaran, M. H. (2007). ‘A simple panel unit root test in the presence of cross‐section dependence’, Journal of Applied Econometrics, 22(2), pp. 265-312.
• Pesaran, M. H. & Yamagata, T. (2008). ‘Testing slope homogeneity in large panels’, Journal of Econometrics, 142(1), pp. 50-93.
• Tan, Y. & Floros, C. (2012). ‘Bank profitability and GDP growth in china: a note’, Journal of Chinese Economic and Business Studies, 10 (3), pp. 267-273.
• Trujillo-Ponce, A. (2013). ‘What determines the profitability of banks? Evidence from Spain’, Accounting and Finance, 53, pp. 561-586.
• Turgut, A. & Ertay, H. I. (2016). ‘Effects of banking sector on economic growth: casual analysis on Turkey’, Aksaray University Journal of Economics and Administrative Sciences, 8 (4), pp. 114-128.
• Ucler, G. & Uysal, D. (2017). ‘Asymmetric relationship between financial performance of Turkish banking sector and macroeconomic performance’, Journal of Economics, Finance and Accounting, 4 (2), pp. 87-97.