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Financial Soundness and Pakistan’s Economics Growth: Turn on the Light

Author

Listed:
  • Ghamz-e-Ali Siyal

    (Department of Management Sciences, COMSATS Institute of Information Technology, Abbottabad, Pakistan)

  • Asma Mohsin
  • Khalid Zaman

Abstract

Financial soundness is a key indicator for fostering economic growth i.e., as economy having healthy financial activities, so it would generate capital inflows to develop their industries and reducing external dependencies. This study examines the relationship among broad money supply, foreign debt, interest rate, changes in price level, trade openness, world interest rate and economic growth, by using cointegration and causality analysis tests for Pakistan. Johansen cointegration tests specified the validity of long run cointegration relationships between financial soundness and Pakistan’s economic growth. Findings: The causality test confirms the feedback hypothesis; unidirectional relationship and neutrality hypothesis between the key macroeconomic variables and financial soundness. The present opens up new directions for policy makers in using financial system as tool to promote economic growth in Pakistan.

Suggested Citation

  • Ghamz-e-Ali Siyal & Asma Mohsin & Khalid Zaman, 2014. "Financial Soundness and Pakistan’s Economics Growth: Turn on the Light," International Journal of Economics and Empirical Research (IJEER), The Economics and Social Development Organization (TESDO), vol. 2(9), pages 359-371, September.
    • Handle: RePEc:ijr:journl:v:2:y:2014:i:9:p:359-371
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    References listed on IDEAS

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    Cited by:

    1. Muhammad Shahbaz & Nanthakumar Loganathan & Aviral Tiwari & Reza Sherafatian-Jahromi, 2015. "Financial Development and Income Inequality: Is There Any Financial Kuznets Curve in Iran?," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 124(2), pages 357-382, November.
    2. Abdul Rahim Ridzuan & Shahsuzan Zakaria & Bayu Arie Fianto & Nora Yusma Mohamed Yusoff & Nor Fatimah Che Sulaiman & Mohamad Idham Md Razak & Siswantini Siswantini & Arsiyanti Lestari, 2021. "Nexus between Financial Development and Income Inequality before Pandemic Covid-19: Does Financial Kuznets Curve Exist in Malaysia, Indonesia, Thailand and Philippines?," International Journal of Energy Economics and Policy, Econjournals, vol. 11(2), pages 260-271.

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    More about this item

    Keywords

    Financial soundness; economic growth; Pakistan;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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