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The dynamic of financial development, imports, foreign direct investment and economic growth: cointegration and causality analysis in Pakistan

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  • Muhammad, Shahbaz
  • mohammad, Mafizur Rahman

Abstract

The paper investigates the effect of financial development, imports and foreign direct investment (FDI) on output in case of Pakistan over the period of 1990-2008 using quarterly data set. ARDL bounds testing approach is applied to examine the long run relationship and the direction of causality is investigated by using VECM framework. Our findings confirm the existence of cointegration, showing long run relation between financial development, imports, FDI and real GDP. Financial development, imports and FDI have positive and significant effect on the output of the country. Causality analysis reveals bidirectional relation among the variables but strong causality is also running from financial development, economic growth and FDI to real imports.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 32181.

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Date of creation: 04 Jul 2011
Date of revision: 12 Jul 2011
Handle: RePEc:pra:mprapa:32181

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Keywords: Financial Development; Imports; FDI; Economic Growth;

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Citations

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Cited by:
  1. Muhammad, Shahbaz, 2012. "Does Trade Openness Affect Long Run Growth? Cointegration, Causality and Forecast Error Variance Decomposition Tests for Pakistan," MPRA Paper 37391, University Library of Munich, Germany, revised 10 Mar 2012.
  2. Muhammad, Shahbaz & Mohammad, Mafizur Rahman & Abdul, Farooq, 2012. "Financial Development, International Trade and Economic Growth in Australia:New Evidence from Multivariate Framework Analysis," MPRA Paper 42023, University Library of Munich, Germany, revised 17 Oct 2012.
  3. Uddin, Gazi Salah & Sjö, Bo & Shahbaz, Muhammad, 2013. "The causal nexus between financial development and economic growth in Kenya," Economic Modelling, Elsevier, vol. 35(C), pages 701-707.
  4. Greenwell Collins Matchaya & Pius Chilonda & Sibusiso Nhelengethwa, 2013. "International Trade and Income in Malawi: A Co-integration and Causality Approach," International Journal of Economic Sciences and Applied Research (IJESAR), Technological Educational Institute (TEI) of Kavala, Greece, vol. 6(2), pages 125-147, September.
  5. Shahbaz, Muhammad & Tiwari, Aviral Kumar & Tahir, Mohammad Iqbal, 2013. "Analyzing Time-Frequency Relationship between Oil Price and Exchange Rate in Pakistan through Wavelets," MPRA Paper 48086, University Library of Munich, Germany, revised 05 Jul 2013.
  6. Muhammad Shahbaz & Ijaz Rehman & Nurul Mahdzan, 2014. "Linkages between income inequality, international remittances and economic growth in Pakistan," Quality & Quantity: International Journal of Methodology, Springer, vol. 48(3), pages 1511-1535, May.
  7. KARGI, Bilal, 2014. "Portfolio in Turkish Economy, and A Long Termed Relation Between Foreign Direct Investments and The Growth, and The Structural Breakage Analysis (1980-2012)," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 70-81.
  8. repec:ipg:wpaper:37 is not listed on IDEAS
  9. Kandil, Magda & Shahbaz, Muhammad & Nasreen, Samia, 2013. "The Interaction between Globalization and Financial Development: New Evidence from Panel Co-integration and Causality Analysis," MPRA Paper 52148, University Library of Munich, Germany, revised 10 Dec 2013.
  10. Mohamed Arouri & Gazi Salah Uddin & Kishwar Nawaz & Muhammad Shahbaz & Frédéric Teulon, 2013. "Causal Linkages between Financial Development, Trade Openness and Economic Growth: Fresh Evidence from Innovative Accounting Approach in Case of Bangladesh," Working Papers 2013-037, Department of Research, Ipag Business School.

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