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Financial Liberalisation and Economic Growth: A Preliminary Analysis

Mamoon, Dawood and Nicholas, Howard (2017): Financial Liberalisation and Economic Growth: A Preliminary Analysis.

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Abstract

In Pakistan, various measures were undertaken during the period of 1989 to 1994 to liberalize financial sector as part of the overall structural adjustment program (SAP) with the objective to promote economic growth and welfare. Following McKinnon and Shaw (MS) thesis (1973), it was assumed that financial liberalistaion through “deepening” and eliminating distortion and segmentation of financial markets, improves the process of the mobilisation of savings as well as the efficiency of investment, thereby accelerating the overall rate of economic growth. Financial liberalisation exerted positive effects on the financial system through a more efficient banking sector and more actively performing securities market in Pakistan. In addition to this, a considerable financial deepening was also witnessed after the 1990s in the financial sector through improved banking mechanism.

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