Studying the nature of the relationship between cash management, foreign reserves and bank credit and their reflection on economic growth) Study of selected countries with reference to Iraq
A Dissertation submitted to the Council of the College of Administration and Economics at the University of Karbala as part of the requirements for obtaining a doctorate degree in financial and banking sciences
by the student
Ameen Fahad Jayed
supervision
Prof.Dr. Abbas Kadum Al-Daami
ABSTRACT
This study aimed to discover the relationship between money supply, foreign reserves, bank credit, and economic growth in advanced and emerging economies. Data tests have been carried out In the UK, Malaysia, Brazil and Iraq using time series data over the past two decades. Where the joint integration test was used to discover the long-term balance between the time series of the study variables, and the researcher used the causality test (Toda yama moto) to find out the causal relationship between the monetary variables in question, while the standard (ARDL) model was used to find out the impact of monetary variables on economic growth in the study sample countries.
The results suggest a significant long-term correlation between money supply, foreign reserves, bank credit and economic growth in all four countries. The results also showed that there Is a one- or bidirectional causal relationship between the variables. Money supply and bank credit have been shown to have a strong positive impact on short- and long-term economic growth across the sample. Foreign exchange reserves positively affect long-term growth, but their short-term impact is minimal.
The results suggest that an expansionary monetary policy by Injecting money supply and expanding bank credit promotes higher economic growth. Countries should aim to increase money in circulation and boost bank lending to stimulate productive economic activities. However, excessive credit expansion can lead to higher inflation. Policymakers must strike a balance between supporting growth and maintaining price stability.
In addition, the accumulation of foreign reserves provides countries with insurance against external shocks and financial crises. This helps to maintain long-term growth. But the accumulation of reserves does not immediately accelerate growth. These findings are particularly important for emerging economies such as Malaysia, Brazil and Iraq that are working towards higher growth and development. Overall, the study provides important insights into the development of effective monetary policies to promote stable economic growth in the short and long term.
