The Impact of Financial Sector Development on the Sustainable Economic Growth of Pakistan

Abstract

Purpose: The study examine the impact of financial Institutions and markets development on the sustainable economic growth of Pakistan. Design/Methodology/Approach: Time series data of Pakistan is analyzed from 1985 to 2022 by using OLS. Findings: Financial institutions development particularly banks are playing positive role in the real GDP growth rate of Pakistan. Financial openness has neutral effect, intermediation and liquidity has positive effect and financial institutions expansion has negative effect on the real GDP. The financial markets development is playing negative role in the real GDP growth rate in Pakistan due to weak, fragile and inefficient market institutions. Implications/Originality/Value: Our study findings suggest that for a sustainable economic growth Government should encourage and support financial institutions particularly banks to increase economic activities in the country.