Financial Development and Economic Growth: The Case of Pakistan

Pakistan Development Review, Vol. 44, No. 4, Winter 2005

17 Pages Posted: 7 Mar 2007

See all articles by Arshad

Arshad

Quaid-i-Azam University - Pakistan Institute of Development Economics (PIDE)

Abdul Qayyum

Saeed Ahmed Skeikh

affiliation not provided to SSRN

Abstract

This paper has examined the empirical relationship between financial development and economic growth in Pakistan over the period 1971-2004. The results show that, in the long run financial depth and real interest exerted positive impact on economic growth. The share of investment is although positively correlated to real income, but remained insignificant. Furthermore, in the short run economic growth is positively and significantly affected by changes in the share of investment. Moreover, changes in real interest rate exerted positive (negative) impact on growth. However, the response of real interest rate is very small in the short run. The feed back coefficient is negative and significant, suggesting about 0.06 percent disequilibrium in the previous period is corrected in the current year. We find a stable long run relationship between economic growth and financial depth. Unlike Ireland (1994) and Demetriades and Hussein (1996), our findings are consistent with the view that economic growth is an outcome of the financial development.

Keywords: Financial development, Economic growth, Pakistan

Suggested Citation

Khan, Muhammad Arshad and Qayyum, Abdul and Skeikh, Saeed Ahmed, Financial Development and Economic Growth: The Case of Pakistan. Pakistan Development Review, Vol. 44, No. 4, Winter 2005. Available at SSRN: https://ssrn.com/abstract=967259

Muhammad Arshad Khan

Quaid-i-Azam University - Pakistan Institute of Development Economics (PIDE) ( email )

Quaid-i-Azam University Campus
P.O.Box 1091
Islamabad, Federal Capital 44000
Pakistan

Saeed Ahmed Skeikh

affiliation not provided to SSRN ( email )

No Address Available

No contact information is available for Abdul Qayyum

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