The impact of bank credits on economic growth considering the income level of provinces

Increase of GDP in an economic system depends on the amount of investment, for which banks play a major role in providing funds.The purpose of this study is to investigate the effect of bank credits on the economic growthof provinces with the level of their income in focus. In order to assess the role of income level in the effectiveness of banking credits in economic growth, the provinces are divided into high-income and low-income groups. The econometric model of this research is determined using the panel data in 31 provinces and the dynamic panelduring 2006-2014. The results show that the credits granted by banks have had positive and significant effects on economic growth in the provinces. Also, the impact of bank credits on economic growth is higher in the low-income provinces than in high-income ones,and the regional level of income has played an important role to promote the economic growth by bank credits. In addition, the effect of explanatory variables such as human capital, urbanization rate and current expenditures has been positive and significant on the growth of the provinces.