IDEAS home Printed from
MyIDEAS: Login to save this article or follow this journal

Macroeconomic Environment and Financial Sector’s Performance: Econometric Evidence from Three Traditional Approaches

  • Muhammad Shahbaz
  • S M Aamir Shamim
  • Naveed Aamir

Stable macroeconomic condition is the prerequisite for sound and healthy performance of the financial sector in the country. The study explores the impact of macroeconomic environment on financial sector’s performance in Pakistan. In doing so, it employs the Fully Modified Ordinary Least Square (FMOLS) approach for cointegration (long-run association) and error correction method for short-run relation. Also Ng-Perron test is used to find out the integrating order of the running variables. The present paper reveals that previous policies of financial institutions and economic growth have improved the level of financial development. Increases in both government spending as well as foreign remittances push the performance of the financial sector upwards. Contrarily, the efficiency of financial markets deteriorates on account of rising inflation due to its damaging impact, while literacy rate has a negative influence on the banking sector in Pakistan. Trade openness along with improved capital inflows open new directions to improve the development of financial markets in the country. Further, performance of the financial sector is attached to qualified institutions. The high savings rate declines the efficiency of banking sector and political instability retards the performance of financial markets.

To our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.

Article provided by IUP Publications in its journal The IUP Journal of Financial Economics.

Volume (Year): VIII (2010)
Issue (Month): 1 & 2 (March & June)
Pages: 103-123

in new window

Handle: RePEc:icf:icfjfe:v:08:y:2010:i:1&2:p:103-123
Contact details of provider:

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:icf:icfjfe:v:08:y:2010:i:1&2:p:103-123. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (G R K Murty)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.