IMPACT OF BANKING, INSURANCE, AND STOCK MARKET DEVELOPMENT ON ECONOMIC GROWTH: A CASE STUDY OF PAKISTAN

Abstract

This study aims to analyze the impact of Banking sector, Stock Market and Insurance sector on economic growth of Pakistan This study uses time series data from 2000 to 2024, sourced from the State Bank of Pakistan, the Economic Survey of Pakistan, the World Bank, and the Pakistan Bureau of Statistics (PBS). The study employs bound cointegration test and ARDL model to investigate the long run relationship among the variables. The results confirm a stable long-run equilibrium relationship, indicating that approximately 45.2% of the short-term disequilibrium in GDP per capita is corrected each period, restoring balance among banking sector development, stock market development, and insurance sector development. The results indicate that Banking sector credit, stock market capitalization, and insurance premium volume all show a positive and statistically significant impact on GDP per capita. This study recommends adopting those measures that lower the cost of doing business in Pakistan in order to encourage investment. The results show that if a country implements both short and long-term measures to support expansion of its financial sector, it may boost economic growth.