Abstract
This study aims to investigate the effect of financial development on the economic growth of Pakistan and applied Auto Regressive Distributed Lag (ARDL) approach to compute the data period of 1979-2019. This study found that the gross capital formation haspositive and significant effect on economic growth in the long-run and short-run. The financial development has a positive and statistically significant effect on economic growth in the long-run. The Exports, secondary school enrollment, labor force participation, and money supply have also a favorable and significant effect on the economic growth in the long-run. There are exist long-run co integration among the variables including in the model. There is one-way casualty running from GDP per capita to gross capital formation and financial development. Therefore, this study concluded that financial development is more important factor of economic growth and significantly promote with the increase in domestic credit to private sector by banks in Pakistan. This study recommended that the government should create friendly investment environment to boost the private sector investment in the country.
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