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Money, Monetization and Economic Growth in Pakistan

Muhammad Zia Ullah Khan and Chaudhary Abdul Rahman
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Muhammad Zia Ullah Khan: Superior University, Lahore, Pakistan
Chaudhary Abdul Rahman: Superior University, Lahore, Pakistan

International Journal of Economics and Empirical Research (IJEER), 2015, vol. 3, issue 3, 95-104

Abstract: Purpose: It is observed and widely accepted theory among the economists; money plays significant role in determining economic growth of a country. Methodology: In this study; focus was on understanding the relationship between; money, monetization and economic growth of Pakistan. We based my study on endogenous growth theory; helps in empirical testing of Standard Growth Model consist of Dependent Variable; Gross Domestic Product (GDP) per capita and Independent Variables; Inflation, Income disparity, Investment, stock market price, money supply (M2). Auto Regressive Distributive Lag (ARDL) Approach is used to bind the testing to cointegration; which is used to check long equilibrium relationship between all variables in the model. And to check the short term relationship between money supply and economic growth; Error Correction Model is applied to the study. We use series data followed the range 1980-2012 for this study and results of cointegration show that, variables are co-integrated with a long term equilibrium relationship. Findings: We found that error correction term is negative and significant. Recommendations: This study open new directions for further research.

Keywords: GDP; Inflation; Income disparity; Investment; Money supply (M 2); Stock market price (search for similar items in EconPapers)
JEL-codes: E31 (search for similar items in EconPapers)
Date: 2015
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Handle: RePEc:ijr:journl:v:3:y:2015:i:3:p:95-104