Financial Development in the SAARC Region: Identifying Influential Factors

Muhammad Suhail Saleem, Asad Abbas, Dr Muhammad Ramzan Sheikh and Sana Sultan
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Muhammad Suhail Saleem: MPhil. Scholar, School of Economics, Bahauddin Zakariya University Multan, Pakistan
Asad Abbas: Lecturer in Economics, Department of Economics, COMSATS University Islamabad Vehari Campus, Pakistan
Dr Muhammad Ramzan Sheikh: Professor of Economics, School of Economics, Bahauddin Zakariya University Multan, Pakistan
Sana Sultan: Visiting Lecturer, School of Economics, Bahauddin Zakariya University Multan, Pakistan

Bulletin of Business and Economics (BBE), 2024, vol. 13, issue 2, 513-525

Abstract: The study aims to explore the determinants of financial development in SAARC countries by using the panel data of eight SAARC countries over the time period 1990-2022. The study used the Autoregressive Distributed Lag Model (ARDL) to determine the factors that affect financial development. The study used domestic credit to the private sector as a proxy to measure financial development as a dependent variable while independent variables are GDP per capita growth, trade, lending interest rate, gross domestic saving, GDP deflator, and broad money. The study has also applied Granger Causality analysis to determine the causal relationship between variables. The findings of the study indicate that lending interest rate and GDP deflator have a negative impact on domestic credit and GDP per capita growth, trade, gross domestic saving, and broad money have a positive impact on domestic credit. The study recommended that governments of these countries should promote trade openness, growth, saving and broad money to boost financial development. It is also suggested that policymakers should make policies to reduce the interest rate and inflation to promote financial development in SAARC countries.

Keywords: Broad money; saving; trade; Granger causality; inflation (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:rfh:bbejor:v:13:y:2024:i:2:p:513-525

DOI: 10.61506/01.00360

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