Financial Development and Poverty Mitigation : Evidence From Pakistan

Poverty is multifaceted phenomenon. Since last two decades, issue of poverty has been researched or studied from different angles in Pakistan. Diversified policies have been suggested for poverty alleviation. But still the problem exists and needs appropriate solutions. The current study is based on secondary data for the period from 1975-2016, which considers the financial development and trade liberalization as policy variables to reduce the poverty in Pakistan. For this, we have used financial development index that is constructed through principal components analysis (PCA) technique based on different financial indicators. The ARDL approach is used to estimate the model. Based on the results, trade openness and development of financial sector has shown significant impact on poverty alleviation in Pakistan. The study has further emphasized for trade liberalization. It is suggested that trade liberalization and the promotion of financial sector are also essential to reduce the poverty level