THE EXISTENCE OF FINANCIAL INTERMEDIARIES, PUBLIC SPENDING AND ECONOMIC GROWTH IN SELECTED SAARC COUNTRIES: A PANEL DATA ANALYSIS

Author(s) : Muhammad Imran & Maqbool Hussain Sial

Abstract:

The study empirically analyzes the impacts of public spending and efficiency of financial intermediaries on economic growth in selected five SAARC countries using panel data from 1994 to 2018. Financial intermediaries like banks provide different services to the community and earned valuable deposits. On the basis of deposits, it offers credit facility to the community and business units. Domestic credits to private sector and financial system deposit shows worth of financial intermediaries in the economy. Credit to private sector is important for private sector development and for consumer financing which increases aggregate demand hence economic growth. Similarly, financial system deposits (LNFSD) represents more reserves of financial institutions/system which shows more availability of loan lending facility for private sector/ investor which results in higher production/growth in the economy. Government expenditure is one of the prime tools of fiscal policy which shows important role in achieving the goals of growth and stability in the economy in many developing countries. When there is rise in government expenses, it results in creation of jobs, provision of better infrastructure and improvement in services by government in the economy.