Djillali Lyabes University, Sidi Bel Abbes, Algeria

The National Conference on:

The use of monetary liquidity in commercial transactions

And its impact on the Algerian banking services.

May 6th -7th 2014

The authors’ participation form

Family Name: ELIAS

ELHANNANI

Surname: Farah

Nationality: Algerian

Profession: assistant

teacher

Organization: Djilali lyabes

University

Academic Rank: PHD

condidate at Abou Bakr

Belkaid university, Tlemcen,

Algeria.

Email:

faraheliaselhannani@yahoo.fr

Phone number: 0551 55 47

68

Family Name:

BENBOUZIANE

Surname: Mohamed

Nationality: Algerian

Profession: professor of

finance and director of

Laboratory MIFMA

Organization Abu Bekr Belkaid

University, Tlemcen, Algeria

Academic Rank: Professor

Email: mbenbouziane@yahoo.fr

Phone number: 0561329868

Family Name: RECHACHE

Surname: Abbassia

Nationality: Algerian

Profession: Assistante

lecturer “A”.

Organization Djillali Lyabes

University

Academic Rank: PHD

condidate

Email:

rechach2004@yahoo.fr

Phone number:0555369994

Main Lines Of Communication: the role of financial intermediation by

bank and national economic performance (Axe one)

Financial intermediation and economic growth in Algeria:

Empirical investigation using ARDL model

by :

Farah ELIAS ELHANNANI1 & Mohamed BENBOUZIANE2 & Abbassia RECHACHE3

Abstract:

One of the debates in growth theory is the extent to which financial intermediation with its

functions drive economic growth. Over the past two decades, Algeria has courageously

attempted to modernize its financial system despite social strife and challenges posed by the

large hydrocarbon sector and an inefficient public sector. In fact, various reforms have been

undertaken since the early 1990s to the transition from planned to an open market economy.

This paper investigates empirically the long-run relationship between financial

intermediation and economic growth in Algeria during the period 1970- 2012. The study

employs the autoregressive distributed lag (ARDL) approach to cointegration. The analysis is

carried out using three financial indicators which are the ratio of the credit provided to private

sector by commercial banks as a percentage of GDP, the ratio of credit provided by the

banking sector as percentage of GDP and the broad money supply as a percentage of GDP.

The first section provides the research background based on the conceptual framework of

financial intermediation and financial intermediary functions and a set of empirical studies

about financial intermediation-growth nexus. An analytical framework of the Algerian

financial system evolution is provided in the second section. Finally, the econometric model

and results are shown in the third section.

Key words: financial intermediation; economic growth; Algeria; ARDL model.

1 Farah ELIAS ELHANNANI is a PhD candidate at the faculty of economics and Management, University of Tlemcen. And assistant teacher at the university of Sidi Belabbes Tel: 0551 55 47 68, email: faraheliaselhannani@yahoo.fr.

2 Mohamed BENBOUZIANE is a professor of finance at the faculty of economics and management and director of MIFMA laboratory, University of Tlemcen. Tel: 0561329868, email:mbenbouziane@yahoo.fr .

3 Abbassia RECHACHE is an assistant lecturer « A » at Djillali Lyabes University , Sid Bel Abbes, Tel. : 0555369994 email : rechach2004@yahoo.fr

الملخص:الوساطة تقود مدى أي إلى هو النمو نظرية في القائمة النقاشات بين من واحد

. حاولت الماضيتين، العشريتين خالل االقتصادي النمو وظائفها بمختلف المالية

و االجتماعي الصراع من بالرغم المالي نظامها تطوير جريء بشكل الجزائر

حيث الفعال غير العمومي القطاع و المحروقات قطاع هيمنة عن الناتجة التحديات

االقتصاد من االنتقال إطار في التسعينات بداية منذ عديدة بإصالحات باشرت

. الحر السوق اقتصاد إلى المخططالنمو و المالية الوساطة بين األجل الطويلة العالقة تجريبيا الورقة هذه تفحص

الفترة خالل الجزائر في الفجوات. 2012-1970االقتصادي مقاربة الدراسة تستخدم

المشترك للتكامل . ARDLالمبطأة مالية مؤشرات ثالث باستعمال التحليل ينجز

نسبة التجارية، البنوك طرف من الخاص للقطاع الموجهة القروض نسبة في تتمثل

) كل النقدي التوسع مؤشر و البنكي الجهاز طرف من المعروضة القروض

.( خلفيات األول المحور يعرض الخام الداخلي الناتج الى نسبة تحسب المؤشرات

من مجموعة و ووظائفها المالية للوساطة المفاهيمي اإلطار إلى استنادا البحث

. االقتصادي النمو و المالية الوساطة بين العالقة عالجت التي السابقة الدراسات

. أخيرا الثاني المحور في عرضه يتم الجزائري المالي النظام لتطور تحليلي إطار

. الثالث المحور في موضحة التطبيقية النتائج و القياسي النموذج

: الجزائر، االقتصادي، النمو المالية، الوساطة المفتاحية الكلمات

. المبطأة التوزيعية الفجوات نموذج

Introduction: One of the debates in growth theory is the extent to which financial intermediation with its

functions drive economic growth. In fact, the role of financial intermediation in the economic

performance has been examplified in several finance literatures either theoritical or empirical.

The financial intermediation has been defined as the process of indirect finance and is the

primary route for moving funds from lenders to borrowers. This process works through five

main financial functions suggested by Levin (1997): 1-Facilitating the trading, hedging and

pooling risk; 2-Allocating resources; 3-Monitoring managers; 4-Mobilizing savings and 5-

Facilitating the exchange of goods and services.

Over the past two decades Algeria has courageously attempted to modernize its financial

system despite social strife and unique challenges posed by the large hydrocarbon sector.

However, lending by state-owned banks, mostly to public entities, still dominates financial

intermediation, financial markets remain in their infancy, and the implementation of otherwise

laudable regulatory reforms is lagging.

Under this brief introduction, this paper seeks to answer the following question: the

financial reforms contributed in enhancing economic growth in Algeria?. Thus, the paper

investigates empirically in the impact of the Algerian financial intermediation on the

economic growth. The study employs the autoregressive distributed lag (ARDL) approach to

cointegration over the period 1970-2012. The analysis is carried out using three financial

indicators which are the ratio of the credit provided to private sector by commercial banks as

a percentage of GDP, the ratio of credit provided by the banking sector as percentage of GDP

and the broad money supply as a percentage of GDP.

In order to answer the research question, the paper has been devided into three sections: The

first section provides the research background based on the conceptual framework of financial

intermediation and financial intermediary functions and a set of empirical studies about

financial intermediation-growth nexus. An analytical framework of the Algerian financial

system evolution is provided in the second section. Finally, the econometric model and results

are shown in the third section.

I- Research backgrounds :

I-1- The conceptual framework:

According to Frederick Mishkin (2004)1, financial intermediation is the process of indirect

finance and is the primary route for moving funds from lenders to borrowers. This process has

earned a huge interest after the second world war where the nations and economic factors

were obliged to recover their economies and finance the different economic activities. Thus,

the question remains : how can the financial intermediation earn such importance ?. To

answer this, the study provide the different functions of financial intermediaries in any

economy :

Levine (1997)2 breaks the primary function of financial intermediation into five basic

functions :

a- Facilitate the trading, hedging, diversifying, and pooling of risk :

In the presence of specific information and transaction costs, financial markets and

institutions may arise to ease the trading, hedging, and pooling of risk. This subsection

considers two types of risk: liquidity3 and idiosyncratic risk. Liquidity risk arises due to the

uncertainties associated with converting assets into a medium of exchange. Informational

asymmetries and transaction costs may inhibit liquidity and intensify liquidity risk.

b- Allocate resources :

Because many firms and entrepreneurs will solicit capital, financial intermediaries, and

markets that are better at selecting the most promising firms and managers will induce a more

efficient allocation of capital and faster growth.

c- monitor managers and exert corporate control :

Besides reducing the costs of acquiring information ex ante, financial contracts, markets,

and intermediaries may arise to mitigate the information acquisition and enforcement costs of

monitoring firm managers and exerting corporate control ex post, i.e., after financing the

activity.

1Mishkin F. ; « The economics of money, banking and financial markets » ; Wesley series in economics ; Pearson eddition ; 2004.2Levine R. ; « Financial development and economic growth : views and agenda » ; Jouranl of economic literature ; Vol.XXXV(June 1997) ; PP 688-726.3 Liquidity is the ease and speed with which agents can convert assets into purchasing power at agreed prices.

d- mobililize savings :

Mobilization—pooling—involves the agglomeration of capital from disparate savers for

investment. Without access to multiple investors, many production processes would be

constrained to economically inefficient scales.

e- facilitate the exchange of goods and services.

Levine has also provided a theoretical approach to finance and growth in which he showed

how the financial intermediation influence economic growth through the financial functions

cited above (Figure1) :

Figure 1. A Theoretical Approach to Finance and Growth

Source : Levine R. ;  « Financial development and economic growth : views and agenda » ;

Jouranl of economic literature ; Vol.XXXV(June 1997) ; PP 688-726.

The figure above shows that the financial intermediation works with its five functions to

enhance the economic growth through two channels : capital accumulation and technological

innovation. In order to understand the role of innovation in the impact of financial

intermediation on economic growth, Aghion and Banarjee (2005) proposed a model to

demonstrate such relationship and it has been simplified by Van Der Ploeg and Poel hekke

(2008):

The price level Pt is closed to the nominal exchange rate St :

Pt=St Pt¿ Pt

¿ 1

The nominal wages Wt are pre-determined:

Wt=∅ At E [ Pt ] Wt=∅ At E [ St ] : ∅<1 is a constant

At is the productivity

Yt=At √¿ : is the equation of output following the production function where (lt)

indicates the employment.

The profits are determined by: πt ≡ At St √¿−∅ At E [ St ]<¿

The next period’s value of innovations: V t+1=V Pt+1 A t+1 / At+1=γ At

The constant γ is superior to the unity if entrepreneurs have sufficient funds to innovate,

otherwise: At+1=A t . Note that, firms have sufficient funds (profits plus resource revenues Qt)

to innovate if they have enough cash flow to deal with the adverse liquidity shocks which is

interpreted by the equation:

μ (πt +StQt )>z Pt At : µ is a measure of financial development

z is a random liquidity shock.

The probability of innovation represented by the cumulative density function:

pt=F(μ ( πt+StQt )

St At) ………………………………. (1)

This implies that the higher the profits (πt) and the more developed financial system (µ), the

higher the ability of firms to overcome liquidity shocks and thus the higher the probability of

innovations.

The economic growth rate is given by: ¿=E [ A t+1 ]−At

At

¿=(γ−1 ) E [ p t ] …………………… (2)

From equations (1) and (2), the economic growth increases with the expected probability of

innovation.

I-2- The empirical literature on the finance-growth nexus: The relationship between financial intermediation and economic growth has earn a huge

interest in the empirical literature. Starting by the pioneer work of Levine, Loayza and

Beck(1999), this section, sumarizes the most important studies which have tackled this

nexus.

Loayza et al. (1999)1 assessed whether the development of financial intermediaries exersts

a causal influence on economic growth. Using cross-sections, instrumental variables

procedurs and panel techniques, they found that the development of financial intermediaries

has a large causal impact on growth. They alwo showed that cross-country differences in legal

and accounting systems help determine differences in legal and in financial development.

Thus, legal and accounting reform that strengthens creditor rights, contracts enforcement and

accounting practices boosts financial developmant and economic growth. Sinha (2001)2

revised the role of financial intermediation on economic growth under the Shumpeterian

analysis. The author examined how the economy is affected when there are banking crises

arguing that there are important contributions by banks and other financial intermediaries on

the economy.

In a different path, Gantan and Rancier (2004)3 presented empirical support for the existence

of wealth effects in the contribution of financial intermediation to economic growth, and

offers a theoretical explanation for these effects. Using GMM dynamic panel data techniques,

they show that the exogenous contribution of financial development on economic growth has

different effects for different levels of income per capita.

Lee (2005)4 examined the relationship between financial intermediation and economic

performance in Canada for the periods 1870-1926 and 1948-2002 using time series

econometrics. A Vector Auto Regression is constructed to establish the relationship between

the financial and the real sectors. Granger causality tests showed evidence that financial

development leads to economic growth for the 1948-2002 sample and no evidence of the

1 Loayza, Levine and Beck ; « Financial intermediation and growth, causality and causes » ; Policy Research working paper ; World Bank ; 1999.2 Sinha T., « The role of financial intermediation in economic growth : Schumpeter revised » ; Chapter 2 of S. B. Dahiya and V. Orati (eds.) Economic Theory in the Light of Schumpeter's Scientific Heritage, Spellbound Publishers, Rohtak, India, 2001.3 Gaytan and Ranciere ; « Wealth, financial intermediation and economic growth » ; Banco De Mexico ; April 2004.4 Lee J. ; « Financial intermediation and economic growth, evidence from Canada » ; Presented at the Eastern Economics Association New York, New York, March 4, 2005.

reverse. In 1870-1926, only the monetary base variable is significant for growth. The other

variables were insignificant.

Augier and Soedarmono (2011)1 used a neo-classical growth framework to reformulate the

finance-growth nexus. Their model was characterized by the existence of multiple steady

states equilibrium with threshold effect that impedes the economy to reach a long-run higher

steady state equilibrium. Furthermore, they showed that financial intermediary is better than

financial market, in order to reduce threshold effect and to ensure the long-run steady state

equilibrium of capital stock.

In a similar path to our study, Shittu (2012)2 and Safiat Ali (2013)3 tested the existence of a

long run relationship between financial intermediation and economic growth in Nigeria and

Sudan respectively over the period 1970-2010. The main finding was that in both countries,

financial intermediation has an important impact on economic growth.

II-Overview on the Algerian financial sector:

Over the past two decades Algeria has courageously attempted to modernize its financial

system despite social strife and unique challenges posed by the large hydrocarbon sector.

However, lending by state-owned banks, mostly to public entities, still dominates financial

intermediation, financial markets remain in their infancy, and the implementation of otherwise

laudable regulatory reforms is lagging.

Because of hydrocarbon-funded state support to borrowers and lenders alike, the financial

system appears stable although this “stability” carries high costs and distorts risk pricing and

governance.4

The Algerian financial system is dominated by the banking sector which accounts for 93

percent of total financial system assets. It constitutes of twenty nine (29) banks and financial

institutions where:5 six public banks; 14 private banks with foreign capitals in which one with

1 Laurent Augier and Wahyoe Soedarmono, (2011) ''Threshold Effect and Financial Intermediation in Economic Development'', Economics Bulletin, Vol. 31 no.1 pp. 342-357.2 Shittu A.I. ; « Financial intermediation and economic growth in Nigeria » ; British Journal of Arts and Social Sciences ISSN: 2046-9578, Vol.4 No.2 (2012) ; BritishJournal Publishing, Inc. 2012 http://www.bjournal.co.uk/BJASS.aspx 3 Safiat A.S.A. ; « Financial intermediation and economic growth in Sudan : an empirical investigation » ; British Journal of Economics, Management & Trade 3(4): 332-358, 20134 Algeria: Financial Sector assessment program (FSAP); International Monetary Fund and the World Bank; SecM2004-0344; July 2004.5 Data are brought from the annual report of the Bank of Algeria (Rapport d’activité 2012).

mixed capital; three financial institutions in which two are public; 5 leasing companies and

one mutual insurance with the status of a financial institution.

Table1: The structure of the Algerian banking sector.

Source: International Institute of Finance2010.

II-1- The financial reforms during 1990-1999

After the crisis of 1986 and the failure of the centralized planed system, the Algerian

government started to think to privatize its economy where 1990 was the key year of that

transition. Algeria implemented several reforms starting by the financial sector under the

following objectives1: reduction of the direct government intervention and strengthen the role

of market forces in the allocation of financial resources; improvement of the financial

institutions capacity to mobilize the domestic saving; enhancing the effectiveness of monetary

policy instruments; promoting competition among banks and strengthening their financial

soundness. In April 1990, Algeria has adopted the law on currency and credit (90-10) to grant

greater independence to the central bank (Bank of Algeria since 1990) and strengthen its

capacity for banking supervision. Under this law and during the decade of 1990s, the

following decisions have been taken:

Deposit interest rates were fully liberalized and ceilings on lending rates were replaced

by limits on banking spreads in 1994;

The transfer of monetary policy responsibilities to the central banks and the

recapitalization of commercial banks;

Foreign participation in the capital of the domestic banks was allowed since 1994;

The dismantling of the restrictions on the use of foreign exchange began in April 1994

and an interbank foreign exchange market was established since 1996.

It can be observable that most of the reforms have been applied since 1994 which was the

year of starting the programs of structural adjustment instructed by the International Monetary

Fund and the World Bank.

1 Jbili, Enders and Treichel ; « Financial sector reforms in Algeria, Morocco and Tunisia : a preliminary assessment » ; International Monetary Fund working paper 97/81; 1997; P12.

II-2- Financial reforms during 2000-2012:

In this period, the financial reforms continued to be applied under a regulatory and technical

framework in which we stress the following points1:

Order 03-11 on Currency and Credit,

The fivefold increase in the minimum capital requirement for banks and finance

companies,

The establishment of a real-time gross settlement (RTGS)2 system for large-value

payments in February 2006, and a clearing system for retail payments in the first half

of 2006,

The legislation on mortgage securitization,

financial leasing for real estate, factoring, promotion of venture capital,

the overhaul of the Algiers stock exchange since 2003,

the fight against money laundering,

The strengthening of the internal audit function (audit committees) and personnel

management function at government banks (performance contracts),

Order n° 10-04 of August 26th 2010 which modifies and completes the order 03-11.

The figure below shows the evolution in the key variables of the banking system during the

period of the study:

Figure1: the evolution of the banking system’s variables 1990-2012

1 CGAP; “Microfinance in Algeria: challenges and opportunities”; Joint CGAP and AFD Mission under the auspices of the Ministry of Finance Deputy Minister for Financial Reform; Final Report June 2006.2 The RTGS16 system has been operational since early February 2006. It handles large-value interbank payments with a minimum payment amount of DZD 1 million.

19901992

19941996

19982000

20022004

20062008

20102012

-20

0

20

40

60

80

100

domestic credit to the private sec-tor(% of GDP)domestic credit provided by the banking sector (% of GDP)broad money (%of GDP)

Source: structured by the author using data of the World Bank.

III-The econometric study:

III-1- Data and methodology: This study seeks to test the longrun relationship between three financial indicators and

economic growth in algeria over the period 1970-2012. It uses the bound test approach to

cointegration (ARDL model) developed by Pesaran (2001).

III-1-1 Description of the data:

The data are all taken from the world development indicators (the World Bank data basis)

for the period 1970-2012 (43 observations).

Financial indicators:

In order to show the financial development effect, we use first the domestic credit provided

by the banking sector (Credit). The second financial indicator used is the domestic credit to

the private sector (Private), and third, the broad money supply (money and quasi money M2)

is also included in our model. Data are measured as percentage of GDP.

Economic growth:

The variable is calculated by the annual growth rate of the real gross domestic product per

capita at constant 2005 U.S. $.

III-1-2 Methodology:

To empirically analyse the long-run relationships and dynamic interactions among the

variables of interest, the model has been estimated by using the bounds testing (or

autoregressive distributed lag (ARDL)) cointegration procedure, developed by Pesaran 20011.

The procedure is adopted for the following three reasons. Firstly, the bounds test procedure is

simple. As opposed to other multivariate cointegration techniques such as Johansen and

Juselius, it allows the cointegration relationship to be estimated by OLS once the lag order of

the model is identified. Secondly, the bounds testing procedure does not require the pre-

testing of the variables included in the model for unit roots unlike other techniques such as the

Johansen approach. It is applicable irrespective of whether the regressors in the model are

purely I(0), purely I(1) or mutually cointegrated. Thirdly, the test is relatively more efficient

in small or finite sample data sizes as is the case in this study. The procedure will however

crash in the presence of I(2) series. Regarding the objective of this study and the model proposed by Pesaran, the following steps

are pursued :

1- Unit root tests for the variables, Augmented Dickey Fuller (ADF) test is used. This

test of stationarity is used only to avoid the occurrence of spurious results and to

confirm that the variables are not I(2).

2- Bound test for cointegration, in this step, OLS method is used to estimate the

following model :

y t=α+γ 1 y t−1+γ2 FI t−1+∑i=0

p

δ1 ∆ y t−i+∑i=0

p

δ2 ∆ FI t−i+εt

The long run relationship is shown by testing the significance of the parameters: γ1 , γ2 , γ 3∧γ 4

using F statistic provided by WALD-test. The null hypothesis for no-cointegration is : H0 :

γ1=γ2=0.

3- After testing for the long run association and in the case of the occurrence of

cointegration between variables, ARDL model should be estimated to measure this

relationship by estimating the following model:

y t=α+∑i=0

p

δ 1 y t−i+∑i=0

p

δ2 FI t−i+εt

III-2- Empirical results:

1 Pesaran, Smith and Shin ; « Bound testing approaches to the analysis of long run relationships » ; Journal of applied Econometrics ; Vol.16 Isuue3 ; June 2001 ; PP 289-326.

The Philippe-Perron test for unit roots has shown that non of the variables is I(2) which

means that the ARDL is appropriate to be used in the estimation of the relationship between

variables of the study.

Table2: Philippe-Perron test for stationarity

level First difference

Intercept Trend and

intercept

Intercept Trend and

intercept

Result

RGDP

growth rate

(y)

t= -8.1

(0.000)***

-8.23

(0.000)***

//// //// I(0)

M2 -1.71

(0.41)

-1.73

(0.71)

-5.15

(0.0001)***

-5.07

(0.0009)***

I(1)

Credit -0.29

(0.91)

-1.73

(0.71)

-5.28

(0.0001)***

-5.46

(0.0003)***

I(1)

Private -1.14

(0.69)

-2.24

(0.45)

-4.8

(0.0003)***

-4.76

(0.002)***

I(1)

*, **, *** level of significance at 10%, 5% and 1% respectively, values between () are

probabilities of t-statistics

The results show that some of the variables are I(1) while others are I(0) which leads us to

use upper and lower critical bounds of F-statistic suggested by Pesaran et al. (2011) to test the

null hypothesis H0 for no-cointegration between the variables.

Table3: Cointegration test (bounds test): (Dependent variable (Real GDP growth rate))

the

financial

indicators

F-statistics Critical value bounds of the F-statistics

1% level 5% level

I(0) I(1) I(0) I(1)

M2 10.27

(0.0004)***

5.15 6.36 3.79 4.85

Credit 8.12

(0.001)***

5.15 6.36 3.79 4.85

Private 6.62

(0.003)***

5.15 6.36 3.79 4.85

The F-statistics are calculated using the WALD test for coefficients diagnostic. The critical

values are brought from Pesaran et al. (2001), Table C1 iii, case III.

Table 3 reveals the existence of a long run relationship (cointegration) between each one of

the financial indicators and the growth of the GDP. The calculated F-statistics is greater than

the upper critical value bound which means that we reject the null hypothesis H0 of no

cointegration and we accept the alternative one which reflects the existence of cointegration

relationship between the variables used in the study.

After testing for the cointegration, the next step in the ARDL model is to estimate this

long-run relationship by estimating the model:

y t=α+∑i=0

p

δ 1 y t−i+∑i=0

p

δ2 FI t−i+εt

Before the estimation, ARDL approach needs the lag orders to be determined using Schwartz

information criterion. The estimation results are shown in Table 4.

Table4: Estimation results of the long run relationship (ARDL model) for the dependent

variable (real GDP growth):

Independent variables

(explanatory)

Model 1 Model 2 Model 3

Lagged(y) y t−1 -0.23

(1.73)*

-0.23

(1.70)*

-0.21

(1.58)

M2t-1 -0.11

(2.00)*

Creditt-1 -0.04

(1.68)

Privatet-1 -0.04

(1.54)

The constant 0.08

(2.56)**

0.03

(0.87)***

0.03

(2.87)***

R-squared 14% 11% 10%

Adjusted R-squared 9% 7% 5%

F-statistic 3.13* 2.51* 2.28

Values in parenthesis are the absolute values of the t-statistics. *, **, *** indicate significance at

10%, 5% and 1% respectively.

The estimation for the cointegration linkage between financial intermediation and economic

growth in Algeria shows that only the money supply indicator (M2) has a significant effect on

economic growth where the model 1 indicates that in the long run, an increase of 1% in M2

led to a decrease in economic growth with 0.11%. This negative association confirms the

ineffective Algerian monetary policy in promoting economic growth and thus, the expansion

in the broad money supply has no basis in the real activity. The negative and non-significant

results for the other two indicators (Credit and Private) can be explained by the weak

contribution of the financial sector and the private sector in the economic activity because of

the planned economic system used before 1990. Econometrically, the three models shows that

the Algerian economic growth is affected by its previous value which means that the

economic growth has a trend effect. The low coefficients of determination (10 to 14%)

indicate the low contribution of the independent variables used in the study to explain the

growth GDP and confirm the existence of other variables that have been excluded in this

research.

References:

1. Aghion P.and Banerjee A.  « Volatility and growth », Oxford University Press, 2005.

2. Algeria: Financial Sector assessment program (FSAP); International Monetary Fund

and the World Bank; SecM2004-0344; July 2004.

3. CGAP; “Microfinance in Algeria: challenges and opportunities”; Joint CGAP and

AFD Mission under the auspices of the Ministry of Finance Deputy Minister for Financial

Reform; Final Report June 2006.

4. Gaytan and Ranciere ; «  Wealth, financial intermediation and economic growth » ;

Banco De Mexico ; April 2004.

5. Jbili, Enders and Treichel ; « Financial sector reforms in Algeria, Morocco and

Tunisia : a preliminary assessment » ; International Monetary Fund working paper 97/81;

1997.

6. Laurent Augier and Wahyoe Soedarmono, (2011) ''Threshold Effect and Financial

Intermediation in Economic Development'', Economics Bulletin, Vol. 31 no.1 pp. 342-357.

7. Lee J. ; « Financial intermediation and economic growth, evidence from Canada » ;

Presented at the Eastern Economics Association New York, New York, March 4, 2005.

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