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Financial Development, International Trade and Economic Growth: Empirical Evidence from Pakistan

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  • Shaheen, Safana
  • Awan, Masood Sarwar
  • Waqas, Muhammad
  • Aslam, Muhammad Amir

Abstract

The study utilizes the Autoregressive-distributed lag (ARDL) approach for cointegration and Granger causality test, to explore the long run equilibrium relationship and the possible direction of causality between international trade, financial development and economic growth for the Pakistan economy. Imports plus exports of goods and services is used as a proxy for international trade, while broad money (M2) and gross domestic product (GDP) are used as the proxies for financial development and economic growth, respectively. Result explores a long run relationship between the variables. In case of Pakistan, economy supply leading hypothesis is accepted. Moreover, unidirectional causality is observed from international trade to economic growth and from financial development to international trade.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 32876.

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Date of creation: 2011
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Publication status: Published in Romanian Journal of Fiscal Policy 2.2(2011): pp. 11-19
Handle: RePEc:pra:mprapa:32876

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Keywords: Financial development; international trade; economic growth; Pakistan;

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Cited by:
  1. 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.
  2. Shahbaz, Muhammad, 2012. "Does trade openness affect long run growth? Cointegration, causality and forecast error variance decomposition tests for Pakistan," Economic Modelling, Elsevier, Elsevier, vol. 29(6), pages 2325-2339.

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