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What Is The Role Of The Banking Sector In Economic Growth? Case of Tunisian Banks

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  • Souad HAMMAMI*

    (Faculty of Economics and Management of Sousse and MOFID UR13 ES60, University of Sousse, Tunisia)

  • Mounir SMIDA

    (Faculty of Economics and Management of Sousse and MOFID UR13 ES60, University of Sousse, Tunisia)

Abstract

The objective of this article is to test the impact of a financial system inspired mainly by the banking sector on the economic growth in Tunisia. In this work uses annual data from 1980 to 2017. We have used four proxies of Financial Development (DF) with reference to the banking sector, namely Broad Money (M2), Domestic Credit to the Private Sector (DCPS), Credit domestic by banking sector (DCBS), and bank deposits (BDL). Control variables, such as trade (TRADE), government expenditure (govexp), and gross domestic savings (GDS), were added to the analysis. The results revealed that there is a positive relationship and statistically significant difference between financial development and economic growth. However, BDLs are positive but statistically insignificant, and M2 is negative and statistically insignificant. Also, unidirectional and bidirectional causality was found between the variables. Indeed, there is an urgent need for a robust banking sector to ensure long-term sustainable economic growth.

Suggested Citation

  • Souad HAMMAMI* & Mounir SMIDA, 2022. "What Is The Role Of The Banking Sector In Economic Growth? Case of Tunisian Banks," Noble International Journal of Economics and Financial Research, Noble Academic Publsiher, vol. 7(1), pages 24-31, March.
    • Handle: RePEc:nap:nijefr:2022:p:24-31
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