Journal Details
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Pages: 180-196
Abstract
This study examines the impact of bank lending on economic growth in Zimbabwe over the period 2009–2024. Using annual time-series data, the study investigates whether credit extended to the private sector plays a significant role in stimulating economic activity in a developing and financially constrained economy. The analysis is grounded in neoclassical and endogenous growth theories, which emphasise the role of financial intermediation in capital accumulation and productivity growth. An econometric framework based on a log-linear production function is employed, incorporating gross capital formation, labour, interest rates, and foreign direct investment as control variables. Stationarity properties of the variables are examined using the Augmented Dickey–Fuller test, while long-run relationships are assessed through Johansen cointegration techniques. Ordinary Least Squares estimation is applied to evaluate the magnitude and direction of the relationship, and Granger causality tests are used to determine the direction of influence between bank lending and economic growth. The results reveal the existence of a long-run relationship among the variables, with bank lending exerting a positive and statistically significant effect on economic growth. Causality analysis further indicates a directional relationship running from bank lending to economic growth, suggesting that credit expansion precedes growth rather than responding to it. The findings highlight the importance of a stable and efficient banking sector in promoting economic recovery and sustained growth in Zimbabwe. The study recommends policies aimed at strengthening financial intermediation, improving credit allocation to productive sectors, and enhancing macroeconomic stability to support long-term economic growth.