Modeling the Relationship Between Banking Lending Indicators and Economic Growth Rates in Russia Using the Vector Error Correction Model (VECM)

Abstract

          The research discusses the problem of modeling the volume of issued loans and the growth rate of the Russian economy. The importance of this research lies in identifying the factors affecting the growth of the real Gross Domestic Product (GDP) indicator. The analysis of both local and foreign sources does not provide a unified set of factors influencing the growth rate of the Russian economy. The research highlights financial mechanisms, production processes, the volume of lending to individuals and legal entities from institutions and companies, and investment activity. The research addresses the problem of forming a multifactor model to assess the influence of various parameters on the national economic growth rate indicator. The process of modeling GDP based on the components of the influence vector is complex due to the specifics of economic and statistical data. To avoid problems related to cointegration, the Vector Error

Correction Model (VECM) was proposed. The model was tested on statistical banking data of organizations, institutions, and companies within both the banking sector and the real sector of the Russian economy. The findings indicate that under current conditions of regulating the lending process, the banking system does not contribute to increasing production volumes but rather focuses on maintaining the financial stability of companies ("maintaining liquidity levels and increasing financial investments"), without contributing to a significant restructuring of the general structure of the Russian economy. The developed vector error correction model (VECM) enables the identification of deviations from equilibrium and the rate of correction. At the same time, the above-mentioned results allow the conclusion that while there is a positive relationship between the volume of lending and the main indicators, the degree of lending's influence on economic growth is generally insignificant. The Central Bank of Russia should strive to maintain lending rates at levels favorable to sustainable growth while ensuring financial stability.