Department of Banking and Finance, Dr Hasan Murad School of Management (HSM), University of Management and Technology, Lahore, Pakistan
Abstract
This study intends to examine the sources of banking sector development of Pakistan, using capital formation, interest rate, trade deficit, general price level, and remittances as the proposed indicators. There is a lack of studies that investigate the impact of investment and trade deficit on the development of the banking sector. The empirical data for the study is taken from World Development Indicators for 38 years. For reliable estimates, the ARDL cointegration technique has been used to estimate the long-run determinants of the development of the banking sector and financial inclusion. Domestic credit to the private sector has been used as a proxy for the banking sector development because of its market orientation. The results show that an increase in the investment, imports, and general price level leads to an increase in the provision of domestic credit which leads to banking sector development
