The economic growth and the banking credit in Mexico: Granger causality and short-term effects, 2001Q1 – 2016Q4

Abstract

Over the last decades, there has been a growing literature that emphasizes on the capacity of commercial banks to increase the money supply through the act of lending and the relation of the credit channel with the economic growth. Following this economic theory approach, this paper evaluates the causality and the short-term effects between the banking credit and the economic growth in Mexico through the estimation of a Vector Autoregressive (var) model. The main results indicate that from 2001Q1 to 2016Q4 the gdp growth has Granger-caused and a positive effect on the rate of growth of banking credit; however, there is no evidence of causality or any effect of banking credit to the gdp. These results are relevant and could be explained by factors of supply and demand in the credit market.