Abstract

This work is centered on bringing out the link between credit to the private sector inflation and economic growth When lending to the economy is insufficient it poses a problem of slow growth and when credit to the economy is too high it poses a problem of hyper-inflation Using data from world development indicators it employs a Vector auto regressive model involving a system of three equations testing for the direction of causality amongst the variables using the VAR Granger causality block exogeneity Wald Tests The results obtain shows that inflation has a positive and significant effect on growth economic growth has a positive and significant effect on credit to the economy and credit to the economy has a negative and significant effect on inflation Inflation granger causes economic growth economic growth granger causes credit to the private sector and credit to the private sector granger causes inflation