Do Quality of Governance, Remittance and Financial Development affect Growth?

Abstract

The newly elected government of the Pakistan considered corruption as a main hurdle in long-term development of the country on one hand. On the other hand, it is put emphasis on enhancing remittances to maintain Marco-economic stability in Pakistan. Therefore, the aim of this study is to highlight the effects of remittance, quality of governance and financial development in Pakistan for the time 2000 to 2016 using Ordinary Least Square Method (OLS). The aftermaths of the study has shown the positive influence of remittance, quality of governance and financial development on economic development in Pakistan. Conversely, as expected the sign of inflation is negative with in-significant effect. Furthermore, the present study has categorized financial development into banking sector and stock market development to explore their effects separately. For this purpose, two indicators have chosen for banking sector and two for stock market development. Lastly, this paper uses various diagnostic tests to check the various econometric issues in the given models. The results of the diagnostic tests have showed that residual is normally distributed, homoscedastic and absence of serial correlation in all the given models. Moreover, descriptive statistics also shows that variables of present study are normally distributed. In sum, based on the findings this research recommends that by improving the quality of the governance and by increasing the remittances long-term economic growth is possible in Pakistan. In addition, financial development is also an important determinant of growth in Pakistan. Therefore, government focus on eradicating corruption and increasing remittances are the right policies for economy of Pakistan in the long run.