Does financial instability weaken the finance-growth nexus? A case for Pakistan

Muhammad Shahbaz and Muhammad Nasir Malik ()

MPRA Paper from University Library of Munich, Germany

Abstract: The paper investigates whether financial instability weakens finance-growth nexus in case of Pakistan. In doing so ARDL bounds testing approach is used for cointegration among variables over the period of 1971-2005. The results show that financial instability does weaken finance-growth nexus. Trade openness increases economic growth through spillover effects. Increasing inflation retards economic growth i.e., lower inflation rates are necessary for sustained economic growth. Political instability impedes economic growth. The present study indicates new direction for policy makers to sustain the pace of economic growth and avoid financial crisis.

Keywords: Financial Crisis; Financial Development; Economic Growth (search for similar items in EconPapers)
JEL-codes: E44 N1 O11 (search for similar items in EconPapers)
Date: 2011-02-05
New Economics Papers: this item is included in nep-fdg
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Citations: View citations in EconPapers (2)

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Related works:
Working Paper: DOES FINANCIAL INSTABILITY WEAKEN THE FINANCE-GROWTH NEXUS? A CASE FOR PAKISTAN (2011)
Working Paper: Does financial instability weaken the finance-growth nexus? A case for Pakistan (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:28666

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