Financial Development, Economics Growth, Income Inequality Nexus: A Case Study of Pakistan

International Journal of Economics and Empirical Research (IJEER), 2013, vol. 1, issue 3, 24-47

Abstract: The purpose of this study is to examine the interrelationship between financial development, economic growth and income inequality in case of Pakistan. The study has been divided into three linkages; one linkage is between financial development, financial instability and economic growth; second is between financial development, financial instability and income distribution or income inequality, and the last one is between financial development, financial instability and poverty via economic growth. The ARDL bounds testing approach to cointegration has been applied. Our results indicate that the variables are cointegrated for long run. Furthermore, a positive relationship exists between financial development and economic growth. Financial instability not only retards economic growth directly but also weakens finance-growth nexus. The impact of financial development on income inequality is negative. It shows that a rise in financial development improves income distribution or declines income inequality. Financial development improves the incomes of poor segment of population. This empirical evidence confirms the existence of McKinnon Conduit Effect (MCE) in Pakistan. The present study suggests suitable policy options to policy makers in declining income inequality by using financial sector as a policy tool in Pakistan.

Keywords: Financial development; growth; inequality; poverty; Pakistan (search for similar items in EconPapers)
JEL-codes: D53 F43 I31 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://tesdo.org/shared/upload/pdf/papers/IJEER,%201_3_,%2024-47.pdf (application/pdf)
http://tesdo.org/journal_detail.php?paper_id=41&expand_year=2013 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ijr:journl:v:1:y:2013:i:3:p:24-47

Access Statistics for this article

International Journal of Economics and Empirical Research (IJEER) is currently edited by Dr. Muhammad Shahbaz (PhD Applied Economics)

More articles in International Journal of Economics and Empirical Research (IJEER) from The Economics and Social Development Organization (TESDO) Contact information at EDIRC.
Bibliographic data for series maintained by Dr. Muhammad Shahbaz (PhD Applied Economics) ( this e-mail address is bad, please contact ).