Abstract
The study examines the relationship between financial sector development and
economic growth of Pakistan for a period from 1981 to 2015.Using annual time
series data, an econometric model is developed on the basis of theoretical frame
work in line with previous research . To capture various dimensions of financial
development an index is constructed by PCA technique through utilizing
relevant proxies of financial sector development. ARDL bound testing approach
is applied to identify long run relationship and short run dynamics between
financial development and economic growth. Other econometric tests conducted
to test stability and reliability of the model. Findings of the econometric
estimation reveal that a significant long run association exists among the
variables while financial depth and rate of investment have positive significant
effect on economic performance of the country. Results reflect the importance of
financial sector development for economic growth of Pakistan and draw
attention of policy makers for further strengthening the financial sector of
Pakistan.
Mohammad Rizwan-ul-Hassan, Syed Ghazanfer Imam, Shujaat Salim. (2017) Analyzing the Effects of Financial Development on Economic Growth: Empirical Evidence from Pakistan through PCA Approach, Abasyn Journal of Social Sciences, Volume-10, Issue-2.
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