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An Investigation of the Effectiveness of Financial Development in Pakistan

Author

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  • Muhammad Tahir

    (Government College of Commerce and Economics, Karachi.)

Abstract

This study attempts to discern the relationship between economic and financial development in Pakistan for the period 1973 - 2006. Vector error-correction modeling is used toidentify the causality between economic and financial development and the exogeneity of the variable(s) in the model. These error correction terms have been derived from Johansen’s multivariate cointegrating procedure. Results indicate that, in the long run, economic development causes financial development. Furthermore, the real output variable is found to beexogenous. Thus, financial development is seen to be ineffective in terms of economic development determination in Pakistan.

Suggested Citation

  • Muhammad Tahir, 2008. "An Investigation of the Effectiveness of Financial Development in Pakistan," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 13(2), pages 27-44, Jul-Dec.
    • Handle: RePEc:lje:journl:v:13:y:2008:i:2:p:27-44
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    References listed on IDEAS

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    Cited by:

    1. Md. Shabbir Alam & Mustafa Raza Rabbani & Mohammad Rumzi Tausif & Joji Abey, 2021. "Banks’ Performance and Economic Growth in India: A Panel Cointegration Analysis," Economies, MDPI, vol. 9(1), pages 1-13, March.
    2. Mushtaq, Saba, 2016. "Causality between Bank’s major activities and Economic Growth: Evidences from Pakistan," MPRA Paper 69052, University Library of Munich, Germany.
    3. Ijaz Ur Rehman & Muhammad Shahbaz & Phouphet Kyophilavong, 2016. "Do Technological Development and Financial Development Promote Economic Growth: Fresh Evidence from Romania," International Journal of Economics and Empirical Research (IJEER), The Economics and Social Development Organization (TESDO), vol. 4(2), pages 60-76, February.
    4. Bishnu Prasad Gautam Ph.D., 2014. "Financial Development and Economic Growth in Nepal," NRB Working Paper 25/2014, Nepal Rastra Bank, Research Department.
    5. Abdul Rahman & Muhammad Arshad Khan & Lanouar Charfeddine, 2020. "Does Financial Sector Promote Economic Growth in Pakistan? Empirical Evidences From Markov Switching Model," SAGE Open, , vol. 10(4), pages 21582440209, October.
    6. M. Tamilselvan & Srinivasan Palamalai & S. Manikandan & Manjula Veerabhadrappa & Vinod Repalli, 2022. "Does Financial Development Lower Energy Intensity in India?," International Journal of Energy Economics and Policy, Econjournals, vol. 12(5), pages 111-116, September.
    7. Naseer, Ahsan & Su, Chi-Wei & Mirza, Nawazish & Li, Jing-Ping, 2020. "Double jeopardy of resources and investment curse in South Asia: Is technology the only way out?," Resources Policy, Elsevier, vol. 68(C).
    8. Ijaz Rehman & Muhammad Shahbaz, 2014. "Multivariate-based Granger causality between financial deepening and poverty: the case of Pakistan," Quality & Quantity: International Journal of Methodology, Springer, vol. 48(6), pages 3221-3241, November.
    9. Saba Mushtaq, 2016. "Causality between bank’s major activities and economic growth: evidences from Pakistan," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 2(1), pages 1-11, December.

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    More about this item

    Keywords

    Economic Development; Financial Development; Causality.;
    All these keywords.

    JEL classification:

    • C59 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Other
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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