The Philippine bank loans and the production and market performance of industrial and service sectors: A Granger causality analysis

• Main Authors: An, Jinhee, Dineros., Ma. Shaira N., Recarro, Angelica D., Remando, Charlene R.
• Format: text
• Language: English
• Published: Animo Repository 2016
• Subjects: Bank loans > Philippines; Finance and Financial Management
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/6278
• Institution: De La Salle University

This paper examined the relationship and the causality that exist between bank loans and the production and market performance of industrial and service sectors. The variables are as follows: real gross domestic product for industrial sector (RGDPI) and real gross domestic product for service sector (RGDPS) as measures of production performance Philippine Stock Exchange industrial index (PSEI) and Philippine Stock Exchange service index (PSES), as measures of market performance and bank loans for industrial sector (BLIS) and bank loans for service sector (BLSS). To determine the results and fulfill our objectives, the variables undergo different statistical methods, namely: vector error correction model, vector auto regression model and Granger causality test. The result of the study shows that only real gross domestic product for service sector (RGDPS) and bank loans for service sector (BLSS) confirms with the hypothesis that they Granger cause each other and that a positive and significant relationship exists between the two variables. While other variables are either insignificant or have negative impact. The researchers recommend that the management of the firms carefully observe their loan levels to avoid accumulating interests and non-performing loans. The researchers also recommend that the banking industry further strengthen its screening process, to efficiently allocate resources and make loans more accessible to sectors who are in need. For the economy and the government, it should closely monitor the level of loans issued and make ways to improve the infrastructure, monetary policy and the taxing system of the country. For future researchers, the researchers recommend to include other sectors and use bank deposits or non-performing loans instead of outstanding loans.