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Modeling the impact of banking sector credit on growth performance: An empirical evidence of credit to household and enterprise in Pakistan

Author

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  • Sadaf Majeed

    (Department of Economics, Applied Economics Research Centre, University of Karachi, Karachi 75270, Pakistan)

  • Syed Faizan Iftikhar

    (Department of Economics, Applied Economics Research Centre, University of Karachi, Karachi 75270, Pakistan)

  • Zeeshan Atiq

    (Department of Economics, Applied Economics Research Centre, University of Karachi, Karachi 75270, Pakistan)

Abstract

This paper attempts to distinguish the role of banking sector credit to enterprise and household in economic growth of Pakistan for the period from 1982 to 2017. Using Autoregressive Distributed Lag (ARDL) bound technique to cointegration, our results confirm that enterprise credit has a positive and significant impact on the economic growth of Pakistan for the sample period. In contrast, the other component of private credit, i.e., household credit is not a positive driver of economic growth. CUSUM test finds that the parameters of the model with enterprise and household credit are stable. It is recommended therefore that the central bank should modify the credit policy for household sector and support enterprise credit in the context to achieve sustainable economic growth in Pakistan.

Suggested Citation

  • Sadaf Majeed & Syed Faizan Iftikhar & Zeeshan Atiq, 2019. "Modeling the impact of banking sector credit on growth performance: An empirical evidence of credit to household and enterprise in Pakistan," International Journal of Financial Engineering (IJFE), World Scientific Publishing Co. Pte. Ltd., vol. 6(02), pages 1-17, June.
    • Handle: RePEc:wsi:ijfexx:v:06:y:2019:i:02:n:s2424786319500129
    DOI: 10.1142/S2424786319500129
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