Munich Personal RePEc Archive

Causality between Bank’s major activities and Economic Growth: Evidences from Pakistan

Mushtaq, Saba (2016): Causality between Bank’s major activities and Economic Growth: Evidences from Pakistan.

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Abstract

Banking is an important sector of Pakistan’s economy. The two major activities perform by banks are saving and lending. More Deposit saved in banks and more credits provided by banks are considered to have positive impact on economic growth so the aim of this study is to investigate the fact. Johansen test of Co-integration and Granger Causality is employed by using time series data of Pakistan from 1961 to 2013. The results show that there is no co-integration or causal relationship between GDP growth and Deposits in Banks of Pakistan. However there is short run and long run causality running from GDP growth to bank’s lending activities. Hence Government and central bank should make policies by keeping this fact in consideration that bank’s two major activities that are saving and lending does not have impact on GDP growth however GDP growth affects bank’s lending activities.

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