The Role of Financial Development in Determining Infrastructure Development: An Empirical Analysis of Pakistan

Abstract

The purpose of this study is to explore the impact of financial development on infrastructure development in Pakistan. The study uses infrastructure development as the dependent variable while financial development, urbanization, tourism, and gross domestic product (GDP) are used as explanatory variables. The secondary data in this research is sourced from global financial development database, World Development Indicators (WDI), and various economic surveys of Pakistan. Error correction model (ECM) is used. This study uses time series secondary data to examine the causal relationship. The data range from 1991 to 2022. The regression results indicate that there is a direct relationship between financial development and infrastructure development, and has a significant effect. Similarly, international tourism and GDP are positively linked with infrastructure development and has significant effect. There is an inverse relationship between urbanization and infrastructure development.  This study suggests that policymakers should focus on ways to enhance financial resources from different sources to develop the infrastructure conditions in Pakistan.

Keywords

Financial Development, Infrastructure Development, GDP, WDI