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The determinants of economic growth in Pakistan: Does stock market development play a major role?

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  • M Mafizur Rahman
  • M Salahuddin
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    Abstract

    This paper provides an empirical analysis of the relationship between economic growth and its determinants, with special focus on stock market development in Pakistan. Using data for the period from 1971 to 2006, we employ FMOLS and ARDL bounds-testing for the long run relationship and ECM for the short run dynamics. The findings suggest a positive relationship between efficient stock markets and economic growth, both in short run and long run. Financial instability and inflation have negative effects while human capital, foreign direct investment and stock market liquidity have positive effects on growth. The results are consistent with the theoretical and empirical predictions.

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    File URL: http://www.economicissues.org.uk/Files/210Rahman.pdf
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    Bibliographic Info

    Article provided by Economic Issues in its journal Economic Issues.

    Volume (Year): 15 (2010)
    Issue (Month): 2 (September)
    Pages: 69-86

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    Handle: RePEc:eis:articl:210rahman

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    Postal: Burton Street, Nottingham, NG1 4BU
    Web page: http://www.economicissues.org.uk
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    1. Pesaran, M.H. & Smith, R., 1992. "Estimating Long-Run Relationships From Dynamic Heterogeneous Panels," Cambridge Working Papers in Economics 9215, Faculty of Economics, University of Cambridge.
    2. Kwiatkowski, D. & Phillips, P.C.B. & Schmidt, P., 1990. "Testing the Null Hypothesis of Stationarity Against the Alternative of Unit Root : How Sure are we that Economic Time Series have a Unit Root?," Papers 8905, Michigan State - Econometrics and Economic Theory.
    3. K Blackburn & N Bose & S Capasso, 2001. "Financial Development, Financing Choice and Economic Growth," Centre for Growth and Business Cycle Research Discussion Paper Series 07, Economics, The Univeristy of Manchester.
    4. Fase, M. M. G. & Abma, R. C. N., 2003. "Financial environment and economic growth in selected Asian countries," Journal of Asian Economics, Elsevier, vol. 14(1), pages 11-21, February.
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    Cited by:
    1. Shahbaz, Muhammad & Ur Rehman, Ijaz, 2013. "Multivariate–Based Granger Causality between Financial Deepening and Poverty: The Case of Pakistan," MPRA Paper 50834, University Library of Munich, Germany, revised 20 Oct 2013.
    2. Shahbaz, Muhammad & Ur Rehman, Ijaz & Zainudin, Rozaimah, 2013. "Macroeconomic Determinants of Stock Market Capitalization in Pakistan:Fresh Evidence from Cointegration with unknown Structural breaks," MPRA Paper 52490, University Library of Munich, Germany, revised 24 Dec 2013.

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