The Influence Of Financial Development And Structure Of Economic Growth: A Critical Analysis For Market Evaluation Of Pakistan

Abstract

This study looks at the empirical relationship that is measured by the weighted sum of structural activity and structural size in between long-run growth and financial structure. We discovered that, in the context of economy of Pakistan, the financial structure substantially explains output levels and that this is a proxy which is positively connected with growth. We contend that the latter conclusion comes from financial liberalization in an inadequate regulatory framework. Our results also demonstrate that efficiency rather than volume is the primary means of transmitting financial development to growth. Additionally, we investigate a number of theories on the potential impact of financial development and structure on economic growth. Overall, the results of our research suggest that economic growth and output levels are influenced by financial development and structure. But our research goes a step further and suggests that the relationship between financial development and economic growth is most noticeable at lower income levels, meaning developing nations like Pakistan stand to gain the most from the expansion and improvement of the financial sector. However, it's also critical for supporting institutions to play a complementary role in regulating and aiding Pakistan's financial structure development.