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Does Financial and Trade Liberalization Drive Private Savings in Pakistan?

Author

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  • Qazi Muhammad Adnan Hye
  • Wee-Yeap Lau

Abstract

This study contributes to the empirical literature by estimating the impact of financial and trade liberalization on private savings in the case of Pakistan. The ARDL approach to cointegration is used to provide empirical evidence of relationship among financial liberalization, trade liberalization, and private savings. The results indicate that the private income, deposit rate (also known as savings rate), financial system liberalization and public savings have a positive impact on private savings. On the other hand, old age dependency, capital account liberalization, and financial openness are negatively associated with private savings. The trade liberalization index is found to be negatively associated with private savings albeit not significant. An important policy suggestion emerging from the results is that it is vital for the government to liberalize the financial system, i.e. bank sector and stock market in order to mobilize the private savings. Practical implications: The private savings should be mobilized as means to create microfinance for individuals and households. Social implications: Social welfare will increase if microfinance can provide a means to poorer households to start small businesses. To the best the authors' knowledge, this study is the first of its kind to use recent indicators of trade and financial liberalization developed by Lane and Milesi-Ferretti (2007), Wacziarg and Welch (2008) and Chinn and Ito (2006) in the case of Pakistan.

Suggested Citation

  • Qazi Muhammad Adnan Hye & Wee-Yeap Lau, 2018. "Does Financial and Trade Liberalization Drive Private Savings in Pakistan?," Asian Development Policy Review, Asian Economic and Social Society, vol. 6(4), pages 198-212.
    • Handle: RePEc:asi:adprev:v:6:y:2018:i:4:p:198-212:id:266
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    Citations

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    Cited by:

    1. Innocent Chile Nzeh & Benedict I. Uzoechina & Joan Nwamaka Ozoh & Uju Victoria Okoli, 2023. "Examining the Impact of Financial Openness on Domestic Interest Rate in Nigeria," ACTA VSFS, University of Finance and Administration, vol. 17(1), pages 23-38.
    2. Han Wang & Geng Peng & Benfu Lv, 2018. "Effect of Retail Investor Attention on Chinas A-Share Market Under a Strengthening Financial Regulatory Policy," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 8(10), pages 1274-1297, October.
    3. Muhammad Farhan Ashraf & Muhammad Mehran Latif & Hina Kanwal, 2019. "Factors Inducing the Investment and Saving Behaviour in Pakistan," iRASD Journal of Economics, International Research Alliance for Sustainable Development (iRASD), vol. 1(2), pages 82-88, December.

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