Influence of Financial Development on Economic Growth: A Case study of Pakistan Economy

Abstract

Although the relationship between finance and growth is receiving more attention, little is known about how financial development affects growth. Financial development is a multidimensional phenomenon the study checks the impact of financial development by using the proxy of domestic credit on private-sector Education, Private Investment, Government Spending, and Term of Trade. The study checks the impact of financial development on economic growth during the time of 1980-2022 in Pakistan. The VECM results also suggest the existence of short-run association among the selected variables (financial development, economic growth, government spending, education, private investment, and term of trade). The outcome of Johansen’s Cointegration test indicates that financial growth is positively related to economic evolution. The findings of Augmented Dickey-Fuller show financial develop