Private commercial banks and economic growth in the emerging market: An econometric overview

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Abstract

Economic growth is the single most contributory matter in the economic development process. Behind the satisfactory growth rate, the financial system of Bangladesh has contributed. In the economic growth of a country, the banking sector plays a significant role (Alam et al., 2021). In the decade of the 1980s, the banking sector started to contribute under private ownership and Bangladesh watched economic progress from the median of the decade. The simultaneity of phenomena implies that the development of banking sector under private ownership promotes economic growth (supply-leading hypothesis) while the acceleration of economic growth necessitates the development of private banking sector (demand-following hypothesis). Hence, the study aims at the detection of supply-leading or demand-following hypothesis regarding the relation between the functions of private commercial banks (PCBs) and economic growth in Bangladesh. The study has applied the Granger causality test to detect the hypothesis. The development of PCBs and economic growth reinforce each other. To develop the PCBs, recent irregularities should be eradicated. To develop the economy, all the impediments of real sectors should be addressed.

Keywords: Economic Growth, Private Commercial Banks, Demand-Following Hypothesis, Supply-Leading Hypothesis, Granger Causality

Authors’ individual contribution: Conceptualization — S.T. and S.A.; Methodology — S.T. and S.A.; Validation — S.A.; Formal Analysis — S.T.; Investigation — S.T. and S.A.; Writing — Review & Editing — S.T. and S.A.; Visualization — S.T. and S.A.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G18, G21, O43

Received: 19.02.2024
Accepted: 11.10.2024
Published online: 15.10.2024

How to cite this paper: Tasneem, S., & Ahmad, S. (2024). Private commercial banks and economic growth in the emerging market: An econometric overview. Risk Governance and Control: Financial Markets & Institutions, 14(4), 41–49. https://doi.org/10.22495/rgcv14i4p4