DETERMINANTS OF FINANCIAL DEVELOPMENT: IN CASE OF PAKISTAN

Abstract

Purpose: This research work is conducted in order to identify those determinants which affects the financial development in Pakistan economy. Since it is clear that financial depth has a positive effect on economic growth, the questions of what determines financial development remains imperfectly understood. Methodology & Design: Data has been collected over period of 1980-2018 of Pakistan. Multiple regression analysis & correlation techniques were utilized on Eviews to explain the results. Five variables were used to analyze their effect on financial development that is per capita GDP, Trade Intensity, Domestic Private Investment, Human Capital, and Macroeconomic Stability along with a proxy variable for financial development that is M2/GDP. Findings: Empirical findings indicate that per capita GDP, and trade intensity is positively but insignificantly effecting on financial development. While, inflation (proxy for macroeconomic stability) is significantly but negatively impacting on financial development. Whereas, human capital & domestic private investment has significant positive relationship over FD. Recommendations: This research is beneficial for financial policy developers, researchers, economist and financial institutions. These findings suggest that Governments of Pakistan should improve literacy, control inflation, reform trade policies, take measures to enhance domestic investment by private sector, a need to develop stock market to enhance financial development in Pakistan