FINANCIAL REPRESSION, FINANCIAL DEVELOPMENT AND ECONOMIC GROWTH IN PAKISTAN

This study aimed to analyze the relationship between financial repression, financial development, and economic growth in Pakistan, using time series data from 1972 to 2023. The primary objective was to examine the impact of financial development and financial repression on economic growth by employing the ARDL bounds testing approach. The results indicate that financial repression, interest rates, exchange rates and inflation negatively impact economic growth. Conversely, employment force, gross fixed capital formation, financial development, and the human capital index have a positive impact on economic growth in Pakistan. The study suggests that a larger and more skilled workforce contributes to higher productivity and economic output. Investment in infrastructure and capital goods boosts productive capacity and support long-term economic growth. A more developed financial system improves access to credit, facilitates investment, and enhances overall economic performance. Lastly, a higher human capital index, reflecting better education and health, leads to increased productivity and innovation driving economic growth.