Financialisation of Economy and its’ Macro-Economic Dynamics: A Study of Pakistan Economy
Author: Muhammad Arshed Gul Durrani

In this thesis we have studied the phenomenon of financialisation and its macroeconomics dynamics in Pakistan economy for the period from 1974 to 2010. The first part of the study explores the ontology of financialisation. The methodology of study for this part consists of descriptive statistics, graphs and stylised facts, an approach used in nearly all studies of financialisation. As a first step the financial architecture, its constituents and profile have been analysed. The outcome of this step is then used to measure financialisation by devising three measures; the rate of financialisation of the economy, the level of financialisation of the economy and finally, the (National) Financial Index– the main innovation of this study. The second part of the thesis analyse the dynamics of financialisation by studying its long and short term relation with GDP, real interest rates, inflation and capital formation (investment)- the main macroeconomic and financial variables of the economy using Johansen Cointegration and Vector Error Correction techniques. The study finds that the components of financialisation have grown at different rates with the public sector experiencing the highest level of financialisation followed by the banking institutions. Measurements indicate that financialisation of Pakistan economy has grown at a mean rate of 18% with an approximate level of 22% of GDP. The Financial Index shows rising trend from 1992-94 with deregulation and liberalisation. From 2001-2 the index shows sharp climb to peak in 2007-8, descending thereafter. This profile of the financial index shows great similarity to the international trend of the phenomena. The econometric results show significant relation of financialisation with GDP, capital formation, inflation and interest ratein the short run and with capital formation and real interest rates in the long run. The results comply with economic theory. Supervisor:- Dr. Hassan M. Mohsin

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Keywords : Economic Dynamics, Financialisation, Financialisation of Economy, Macro-Economic, Pakistan Economy
Supervisor: Hassan Muhammad Mohsin

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