Impact of Savings and Credit on Economic Growth in Pakistan

The national savings and credit to private sector played important role in economic growth and development of Pakistan. The impact of savings and credit to private sector on economic growth in Pakistan was evaluated in the present study. The time series data for the period of 1973 to 2007 was used to evaluate the impact of savings and credit on economic growth. The data was obtained from various issues of Economic Survey of Pakistan, Federal Bureau of Statistics and State Bank of Pakistan. Augmented Dickey Fuller (ADF) tests were used to check the stationarity of the variables. The long term coefficients were estimated using ARDL approach. The error correction model (ECM) was used for the short run analysis. The results showed that increase in real gross domestic product was 5.59 percent due to one percent increase in credit to private sector. The estimated coefficient of national saving was 1.015 showed that increase in real gross domestic product was 1.015 percent due to one percent increase in national savings. In the short run, the coefficient of credit to private sector was 5.7 and significant. In this way, the credit to private sector has significant impact upon economic growth in the long run but also in the short run. Therefore, government is suggested to formulate the appropriate policies to enhance the savings and credit in the country.