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Local Loan-to-Deposit Ratio and Economic Development Level: An Empirical Study Based on the Chaoshan Region

Author(s)

Xinmeng Hou, Yudi Guo*

Affiliation(s)

School of Economics, Guangzhou College of Commerce, Guangzhou, Guangdong, China *Corresponding Author

Abstract

Using panel data comprising the three cities of Chaozhou, Shantou, and Jieyang in the Chaoshan region, this paper employs a panel regression model to examine the impact of the local loan-to-deposit ratio on the level of economic development. It further introduces the weighted average interest rate on newly issued inclusive loans to small and micro enterprises as a proxy variable for the credit pricing environment and tests its moderating effect. The findings are as follows. First, the local loan-to-deposit ratio has a significant positive effect on gross regional product, indicating that an increase in the loan-to-deposit ratio helps promote local economic development. Second, when per capita GDP is used as an alternative measure or the economic development level in the following year is adopted, this conclusion remains valid, and the effect exhibits a certain degree of intertemporal persistence. Third, the higher the interest rate on inclusive loans to small and micro enterprises, the weaker the positive effect of the loan-to-deposit ratio on economic development, suggesting that lower credit costs help strengthen the growth effect of the loan-to-deposit ratio. This paper provides empirical evidence for the Chaoshan region to improve the efficiency of financial resource allocation, optimize credit extension, and promote high-quality economic development.

Keywords

Local Loan-To-Deposit Ratio; Economic Development Level; Chaoshan Region; Panel Regression

References

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