The Impact of Non-banking Credit Organization Credits on Economic Growth in Azerbaijan

Abstract

Financial institutions plays remarkable role in Azerbaijan economy. The general structure of financial institutions in the country includes banks, local branches of foreign banks and non-bank financial institutions, while among these organizations banks have a leading position. Most of the lending activity in Azerbaijan is carried out through banks. This situation shows their special importance in the country's economy. However, NBCOs (Non-Banking Credit Organizations) also have an important position in lending to the individuals in the economy. This article investigates the impact of the NBCOs credits on non-oil GDP in Azerbaijan. For this purpose, the quarterly data covering 2005-2018 were used. For the evaluation, the cointegration methods as CCR (Canonical Cointegrating Regression), DOLS (Dynamic Ordinary Least Squares) and FMOLS (Fully Modified Ordinary Least Squares) methods were employed. The results of cointegration tests conclude that there is cointegration relationship between the variables in long-term. The results of the estimation show that a 1% rise in credits and physical capital investments increases non-oil GDP by 0.26% and 0.92, respectively. Findings of study are in line with both the theory and the results of other researches, and may be considered adequate for Azerbaijan economy. The management and other decision-makers of relevant organizations may adopt effective decisions for more efficient operation of credit organizations by taking into account the results of the research.