The Impact of The Private Sector Credits On The Economic Growth In The Republic Of North Macedonia

Abstract

The subject of this paper is the impact of lending activity, respectively loans to the private sector as the main pillar of macroeconomic parameters and their relationship to economic growth in the Republic of North Macedonia. The analysis takes into account the data for the period 1996-2018. Hence, the purpose of this paper is to examine the impact of private sector lending in the Republic of North Macedonia on its economic growth. The research relies on multiple regression analysis, where lending is an important part of economic activity and adds a significant contribution to economic growth indicators, primarily gross domestic product per capita. Consequently, the impact of real interest rates and the unemployment rate on economic activity is taken into account, and the impact of several other control variables is also examined. The assumption is that lending activity is a significant determinant of economic growth, with a positive impact. In accordance with the obtained results, it is confirmed that loans to the private sector have a positive impact on economic activity, primarily economic growth in the Republic of North Macedonia. Our findings show rapid growth of loans to the private sector until the Great Economic Crisis, where they are subsequently highly positively linearly related to economic growth in the country.