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An Investigation of the Effectiveness of Financial Development in Pakistan

Muhammad Tahir ()
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Muhammad Tahir: Government College of Commerce and Economics, Karachi.

Lahore Journal of Economics, 2008, vol. 13, issue 2, 27-44

Abstract: This study attempts to discern the relationship between economic and financial development in Pakistan for the period 1973 - 2006. Vector error-correction modeling is used toidentify the causality between economic and financial development and the exogeneity of the variable(s) in the model. These error correction terms have been derived from Johansen’s multivariate cointegrating procedure. Results indicate that, in the long run, economic development causes financial development. Furthermore, the real output variable is found to beexogenous. Thus, financial development is seen to be ineffective in terms of economic development determination in Pakistan.

Keywords: Economic Development; Financial Development; Causality. (search for similar items in EconPapers)
JEL-codes: C59 O16 (search for similar items in EconPapers)
Date: 2008
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Handle: RePEc:lje:journl:v:13:y:2008:i:2:p:27-44