A Restricted Co-integration Analysis of Financial Development and Economic Growth: Evidence from Pakistan

Authors

  • Syed Muhammad Imran Shah Government Associate College Yazman, Pakistan
  • Syed Mumtaz Ali Kazmi Kazmi National College of Business Administration and Economics, Pakistan.
  • Sadia Ayaz National College of Business Administration and Economics, Pakistan.
  • Muhammad Samiullah National College of Business Administration and Economics, Pakistan.

DOI:

https://doi.org/10.52131/jom.2022.0402.0072

Keywords:

Credit, Economic Growth, Cointegration, Vector Error Correction Mechanism

Abstract

The current financial crises once again highlighted the importance of financial sector. Credit availability to firms improves the productivity and encourages private investment both through aggregated demand and aggregated supply. Accumulation of capital and its optimal utilization is important for sustainable growth of an economy. The objective of the current study is to find the effect of financial development on economic growth. The study utilized the restricted cointegration analysis to quantify the long run association between the financial development and economic growth. The result indicates that credit, GDP growth and private investment are cointegrated and in addition, credit trigger economic growth in long run via direct and indirect channel. The study suggested that easy access to credit should be given to augment economic growth.

Author Biographies

Syed Muhammad Imran Shah, Government Associate College Yazman, Pakistan

Lecturer, Department of Economics

Syed Mumtaz Ali Kazmi Kazmi, National College of Business Administration and Economics, Pakistan.

Assistant Professor, Department of Economics

Sadia Ayaz, National College of Business Administration and Economics, Pakistan.

M.Phil. Scholar, Department of Economics

Muhammad Samiullah, National College of Business Administration and Economics, Pakistan.

M.Phil. Scholar, Department of Economics

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Published

2022-05-31

How to Cite

Shah, S. M. I., Kazmi, S. M. A. K., Ayaz, S. ., & Samiullah, M. S. (2022). A Restricted Co-integration Analysis of Financial Development and Economic Growth: Evidence from Pakistan. IRASD Journal of Management, 4(2), 184–190. https://doi.org/10.52131/jom.2022.0402.0072

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Section

Articles