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Multivariate–Based Granger Causality between Financial Deepening and Poverty: The Case of Pakistan

Shahbaz, Muhammad and Ur Rehman, Ijaz (2013): Multivariate–Based Granger Causality between Financial Deepening and Poverty: The Case of Pakistan.

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Abstract

This paper deals with the empirical investigation of causal relationship between financial deepening, economic growth and poverty reduction using quarter frequency data in case of Pakistan over the period of 1972-2011. We applied the ARDL bounds testing approach by incorporating structural breaks stemming in the series. The order of integration of the variables is examined by applying structural break unit root test. Our empirical exercise indicated that long run relationship between financial deepening, economic growth and poverty reduction exists in case of Pakistan. The causality analysis implied that causality results are sensitive with the use of proxy for poverty reduction as well as methodology to be applied.

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