Financial sector reforms in Pakistan and a test for McKinnon and Shaw's transmission mechanism: 'Lessons from the last decade'

Dawood Mamoon

Research output: Working paperAcademic

Abstract

The study tests McKinnon & Shaw’s financial liberalisation paradigm by
capturing the reform process of Pakistani financial sector in the last decade. The study
showed that Pakistan witnessed significant financial development especially in the
banking sector after 1990s. However, as the last decade was associated with one the
poorest performance of the country on macro economic front, the study tries to find
out the possible reasons for the failure of objective of the reform process. This is done
by first establishing two legs of ‘McKinnon & Shaw’s transmission mechanism’,
through which financial development is conduit to real economic activity. As a next
step we employed Vector Autoregressive (VAR) analysis in order to regress these two
legs and then we ran multiple causality tests on subsequent Vector Error Correction
Mechanism (VECM) equations. Such an approach not only allowed us to take on the
critiques of McKinnon and Shaw in a debonair manner but also enabled us to pin
point the shortcomings of the reform process itself.
Original languageEnglish
Place of PublicationDen haag
PublisherInternational Institute of Social Studies (ISS)
Number of pages53
Publication statusPublished - May 2004
Externally publishedYes

Publication series

SeriesISS working papers. General series
Number397
ISSN0921-0210

Series

  • ISS Working Paper-General Series

Fingerprint

Dive into the research topics of 'Financial sector reforms in Pakistan and a test for McKinnon and Shaw's transmission mechanism: 'Lessons from the last decade''. Together they form a unique fingerprint.

Cite this