The Causal Nexus between Financial Development and Manufacturing Sector: Empirical Study for Pakistan

Basharat Batool, Sundas Shafi, Abdur Rahman, Saqib Javed and Misbah Taj
Additional contact information
Basharat Batool: Department of Economics, Kohat University of Science and Technology, Kohat, Pakistan
Sundas Shafi: Department of Economics, Kohat University of Science and Technology, Kohat, Pakistan
Abdur Rahman: Institute of Management Sciences (IMS), University of Haripur, Haripur, Institute of Management Studies (IMS), University of Peshawar, Peshawar, Pakistan
Saqib Javed: Department of Economics, Kohat University of Science and Technology, Kohat, Pakistan
Misbah Taj: Department of Economics, Kohat University of Science and Technology, Kohat, Pakistan

Bulletin of Business and Economics (BBE), 2024, vol. 13, issue 3, 109-114

Abstract: The empirical analysis of the causal nexus among financial development and the manufacturing sector in Pakistan provides significant insights into the elaborate association among these two critical components of the economy. Besides, fiscal policy is used as a control variable. The study used unit root tests to identify the level of integration of the data and concluded that all variables are integrated at first difference which allow use to employ Johansen cointegration test to detect the long run cointegration among variables. Furthermore, the study utilized the VECM to examine the casual association among variables and concluded that the two-way causality among financial development and manufacturing sector in long run as well as in short run. Similarly, fiscal policy is granger causing financial development and manufacturing sector in long run only while fiscal policy is not causing financial development and manufacturing sector in short run. Moreover, financial development and manufacturing sector is granger causing fiscal policy in short run only. The results of the study suggested that to enhance the manufacturing sector's growth, it is crucial to strengthen the financial sector through targeted fiscal policies that promote long-term stability and access to credit.

Keywords: Financial development; Manufacturing Sector; Fiscal Policy; Vector Error Correction Model (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://bbejournal.com/BBE/article/view/961/1028 (application/pdf)
https://bbejournal.com/BBE/article/view/961 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rfh:bbejor:v:13:y:2024:i:3:p:109-114

DOI: 10.61506/01.00453

Access Statistics for this article

Bulletin of Business and Economics (BBE) is currently edited by Dr. Muhammad Irfan Chani

More articles in Bulletin of Business and Economics (BBE) from Research Foundation for Humanity (RFH) Contact information at EDIRC.
Bibliographic data for series maintained by Dr. Muhammad Irfan Chani ().