THE IMPACT OF MACROECONOMIC VARIABLES ON THE PROFITABILITY OF COMMERCIAL BANKING IN PAKISTAN

Abstract

The research was conducted to determine the impact of macroeconomic variables on the profitability of commercial banking in Pakistan over the period from 2007 to 2016. The quarterly data was used. The five major banks of Pakistan were selected to collect the data. Exchange rate, interest rate, inflation rate and money supply were used as independent variables and ROE used as dependent variable. The unit root and ARDL model techniques were used to analyze the data and it was concluded that money supply has positive and insignificant relation with ROE, inflation has negative and insignificant relation with ROE, exchange rate has negative and significant relation with ROE and interest has negative and significant relation with ROE.