Does Financial Sector Promote Economic Growth in Pakistan? Empirical Evidences From Markov Switching Model

Abdul Rahman, Muhammad Arshad Khan and Lanouar Charfeddine

SAGE Open, 2020, vol. 10, issue 4, 2158244020963064

Abstract: This study investigates the financial development–economic growth relationship in Pakistan over the period 1975–2017 using the Markov Switching methodology. The financial development index has been constructed using the principal component analysis. Unexpectedly, the empirical result shows that financial development contributing negatively to economic growth in the high and the low economic growth regimes in Pakistan. Moreover, the results indicate that labor force retards economic growth with a higher magnitude. A significant positive effect of gross fixed capital formation on economic growth is also observed. The results reveal that policymakers may revisit the financial development policies so that the financial sector may contribute positively to economic growth process in Pakistan. In this respect, more steps are needed to further liberalize the financial sector to enhance economic growth in Pakistan.

Keywords: financial development; economic growth; principal component analysis; Markov switching analysis; Pakistan (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
https://journals.sagepub.com/doi/10.1177/2158244020963064 (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:sae:sagope:v:10:y:2020:i:4:p:2158244020963064

DOI: 10.1177/2158244020963064

Access Statistics for this article

More articles in SAGE Open
Bibliographic data for series maintained by SAGE Publications ().