A Restricted Co-integration Analysis of Financial Development and Economic Growth: Evidence from Pakistan
DOI:
https://doi.org/10.52131/jom.2022.0402.0072Keywords:
Credit, Economic Growth, Cointegration, Vector Error Correction MechanismAbstract
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.
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Copyright (c) 2022 Syed Muhammad Imran Shah, Syed Mumtaz Ali Kazmi Kazmi, Sadia Ayaz, Muhammad Samiullah
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.