The Effectiveness of Financial Development and Openness on Economic Growth : Case Study of Pakistan

The objective of this research is to find the long-run association among financial liberalization, international trade openness, real interest rate and economic growth in case of Pakistan's economy, for this purpose annual data for the period of 1975-2009 is considered. Bound testing approach of co-integration which was advanced by Pesaran (2001) and error correction mechanism is employed to analyze the objective of our study. The empirical result shows that both trade liberalization and financial development playing significant and productive role in development of Pakistan's economy. However, the variables of real interest rate and financial openness in the short-run can cause very weak, suggesting further promote reforms process