The performance of financial intermediaries has an important role in the
generation of economic output in a country. The research aims to
examine the role of financial intermediaries in the Azerbaijan economy –
especially the non-oil sector. Using yearly data of 2000-2020, the research
explores the long-run impact of bank and non-bank credits over the non-oil GDP of Azerbaijan. The ARDLBT approach to cointegration is
employed to test the existence of any cointegration relationship in the
estimated models. While controlling for the role of public expenditures,
empirical results reveal that there is a significant positive long-run
impact of non-bank credits over the non-oil sector in Azerbaijan. On the
contrary, the impact of bank credits is found insignificant and not
economically meaningful. The problem requires further investigation
while considering the use of credits obtained from both bank and non-bank credits. If credits are used to finance the purchase of imported
products, it will not have a substantial contribution to the non-oil sector
of Azerbaijan economy. Research findings can be useful to comprehend
the role of financial intermediaries in the non-oil sector and make further
amendments to banking policy.
Citation:
Adilli, N. (2021). The role of financial intermediaries in the economy: The evidence from Azerbaijan. ASERC Journal of Socio-Economic Studies, 4(1), 64-74. DOI:10.30546/2663-7251.2021.4.1.64