Determinants of the domestic credits in developing economies: The role of political risks

Abstract

This paper examines the determinants of the domestic credits in the panel data of 61 developing economies (22 emerging markets and 39 non-emerging developing economies) for the period from 1984 to 2016. The paper finds that the income and the money supply are positively associated with the domestic credits. There also are the negative effects of the current account balance and the interest rate differences on the domestic credits. Further analyses for the subcomponents of the overall political risk measures indicate that the better socioeconomic conditions (i.e. the less poverty, the lower unemployment, and the higher consumer confidence) and the lower corruption positively affect the domestic credits.