International Journal of Advanced and Applied Sciences

Int. j. adv. appl. sci.

EISSN: 2313-3724

Print ISSN: 2313-626X

Volume 4, Issue 4  (April 2017), Pages:  73-80

Title: Financial development, trade openness and economic growth in Pakistan: A granger causality approach

Author(s):  Abbas Ali Chandio 1, Abdul Rehman 2, Yuansheng Jiang 1, *, Mumtaz Ali Joyo 3


1College of Economics and Management, Sichuan Agricultural University, Chengdu, China
2College of Economics and Management, Anhui Agricultural University, Hefei, China
3Department of Agricultural Economics, Sindh Agriculture University, Tandojam, Pakistan

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This study aims to examine the direction of causality between financial development, trade openness and economic growth in Pakistan over the period 1970 to 2014. For this undertaking, statistical tools such as ADF and P-P unit root tests have been used to check stationery of the series and Co-integration test has been used to determine the long run relationship between the study variables. The causality relationship among variable is examined by Granger causality approach. The result of ADF test revealed that all variables become stationery at first difference which confirm to co integration test. Furthermore, the results of Johansen Co integration test indicate that there is existence of a long run relationship between the variables. On the other hand, the results of Granger causality test show that there is a causality relationship which is bi-directional running from economic growth to financial development. While, the results show that there is also causality relationship which is bi-directional running from trade openness to financial development. Our study results revealed that unidirectional causality relationship found out between trade openness to economic growth. The results suggest that financial development and trade openness plays an important role in boosting economic growth in Pakistan. 

© 2017 The Authors. Published by IASE.

This is an open access article under the CC BY-NC-ND license (

Keywords: Economic growth, Financial development, Trade openness, Granger causality

Article History: Received 7 August 2016, Received in revised form 19 March 2017, Accepted 19 March 2017

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Chandio AA, Rehman A, Jiang Y, Joyo MA (2017). Financial development, trade openness and economic growth in Pakistan: A granger causality approach. International Journal of Advanced and Applied Sciences, 4(4): 73-80


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