Exports, financial development and economic growth in Pakistan
Abstract
Purpose
This paper aims to explore the relationship between exports, financial development and economic growth in case of Pakistan.
Design/methodology/approach
The autoregressive distributed lag bounds testing approach to cointegration and error correction model are applied to test the long-run and short-run relationships, respectively. The direction of causality between the variables is investigated by the vector error correction model Granger causality test and robustness of causality analysis is tested by applying innovative accounting approach.
Findings
The analysis confirms cointegration for the long-run relation between exports, economic growth and financial development in case of Pakistan. The results indicate that economic growth and financial development spur exports growth in Pakistan. The causality analysis reveals feedback hypothesis that exists between financial development and economic growth, financial development and exports, and, exports and economic growth.
Originality/value
This study provides new insights for policy makers to sustain exports growth by stimulating economic growth and developing financial sector in Pakistan.
Keywords
Acknowledgements
JEL classification – C22, F10, F14, O53
Citation
Shahbaz, M. and Mafizur Rahman, M. (2014), "Exports, financial development and economic growth in Pakistan", International Journal of Development Issues, Vol. 13 No. 2, pp. 155-170. https://doi.org/10.1108/IJDI-09-2013-0065
Publisher
:Emerald Group Publishing Limited
Copyright © 2014, Emerald Group Publishing Limited