Financial Soundness and Pakistan’s Economics Growth: Turn on the Light

Ghamz-e-Ali Siyal (), Asma Mohsin and Khalid Zaman
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Ghamz-e-Ali Siyal: Department of Management Sciences, COMSATS Institute of Information Technology, Abbottabad, Pakistan

International Journal of Economics and Empirical Research (IJEER), 2014, vol. 2, issue 9, 359-371

Abstract: Financial soundness is a key indicator for fostering economic growth i.e., as economy having healthy financial activities, so it would generate capital inflows to develop their industries and reducing external dependencies. This study examines the relationship among broad money supply, foreign debt, interest rate, changes in price level, trade openness, world interest rate and economic growth, by using cointegration and causality analysis tests for Pakistan. Johansen cointegration tests specified the validity of long run cointegration relationships between financial soundness and Pakistan’s economic growth. Findings: The causality test confirms the feedback hypothesis; unidirectional relationship and neutrality hypothesis between the key macroeconomic variables and financial soundness. The present opens up new directions for policy makers in using financial system as tool to promote economic growth in Pakistan.

Keywords: Financial soundness; economic growth; Pakistan (search for similar items in EconPapers)
JEL-codes: C33 O14 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (2)

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