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Financial development–economic growth nexus in Pakistan: new evidence from the Markov switching model

Year: 2020

Type: article

Abstract: This paper investigates the impact of financial development on economic growth in Pakistan using the Markov Switching Model over the period 1980–2017. The results based on two-state Markov switching model confirm the Schumpeter’s view that finance spurs growth. The result reveals that financial development augments economic growth in both high and low economic growth regimes in Pakistan. However, the impact of financial development on economic growth is found to be relatively higher in the high-growth regime. This implies that economic growth responds differently to financial development in low-growth and high-growth regimes. Among the control variables, trade openness and government expenditures impact economic growth positively, while labour force exerts a negative impact on economic growth.

Source: Cogent Economics & Finance

DOI: 10.1080/23322039.2020.1716446

Authors: Abdul Rahman, Muhammad Arshad Khan, Lanouar Charfeddine

Institutions: COMSATS University Islamabad, Qatar University

Language: English

Topic: Monetary Policy and Economic Impact

Subfield: General Economics, Econometrics and Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: gold

Estimated APC paid: $1,165