EXTERNAL CREDIT AND ECONOMIC GROWTH: ANY RELATIONSHIP FOR NIGERIA?
Oluwasogo S. Adediran1*, Emmanuel O. George2 and Philip O. Alege3
1Department of Economics & Development Studies, Covenant University, Ota, Nigeria,
2Department of Economics, Olabisi Onabanjo University, Ago-Iwoye, Nigeria, Email:email@example.com
3Department of Economics & Development Studies, Covenant University, Ota, Nigeria.
The growing economic linkage between Nigeria and western economies has raised the important issue of susceptibility of Nigerian economy to the adverse effects of structural changes in advanced economies. The need for increasing external credit flows to boost economic activity has exposed Nigeria to the negative effects of external structural changes. Therefore, an important question of concern in this study is, how does the Nigerian economy grow when there is decline in external credit? This study attempted to answer this question by comparing flow of external credit to economic activity. This is a distinction from previous studies that had compared stock of external credit to economic activity. Using annual data covering thirty-six years for the period 1980-2015. The study adopted the neoclassical growth model and estimated the model using Autoregressive Distributed Lag (ARDL) approach. The study argued that, to the extent that expenditure is credit financed, GDP should be a function of credit flow, which is new borrowing. The implication of this is that economic growth should be more related to changes in the flow of credit rather than stock of credit, in the period of economic crisis.
Keywords: External Credit, Economic Growth, Emerging Market Economies, Neoclassical Growth Model and Autoregressive Distributed Lag (ARDL).
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