A COINTEGRATION ANALYSIS OF FINANCIAL LIBERALISATION AND ECONOMIC GROWTH IN PAKISTAN (1972-2016)

Abida YOUSAF*, Fozia BIBI**, and Farhana NAZ***

The present study aims to investigate the financial liberalisation and growth nexus in Pakistan by using the FM-OLS cointegration technique over the time period 1972 to 2016. The importance of the financial liberalisation process in Pakistan has been captured through the capital account liberalisation variables. The study also incorporates financial development as a control variable due to the increasing role of the banking industry. The study finds that capital account liberalisation and financial development promotes the economic growth of the country. Moreover, Investment, human capital, trade openness and government expenditure are also significant contributors to economic growth.

Keywords: Financial Development, Growth, Capital Account Liberalisation, Trade Openness, Human Capital.