IMPACT OF BANKING INSTITUTIONS ON NATIONAL ECONOMY AN EMPIRICAL STUDY OF TIME SERIES ANALYSIS IN PAKISTAN

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Abstract

This paper examines the long and short term relationship of financial sector development on economic growth of Pakistan where development of financial sector is detected by the variables truly depicts the efficiency of financial sector i.e. Money Supply, size of Advances, Private sector Credit growth and Bank’s equity with economic growth which is pronounced by Gross Domestic Product in this study. Data of almost 22 years ranges from 1992 to 2013 of overall banking industry is taken to obtain results by employing Johnson and Jusellious co integration technique to detect long run association while Granger Casualty test is used to determine cause and effect relationship and to measure short term dynamics Vector Error correction model is used. The result shows that both long and short run relationship exists between growth of financial sector and economy of Pakistan.

Key Words: Net interest income (NII), Non performing loans (NPL), Advances (AD), Equity (EQ), Gross Domestic Product (GDP), Co integration Johanson and Jusellious

How to cite this paper: Badar, N., & Badar, M. (2015). Impact of banking institutions on national economy an empirical study of time series analysis in Pakistan. Journal of Governance and Regulation, 4(4-2), 327-333. https://doi.org/10.22495/jgr_v4_i4_c2_p5