The Determinants of Growth In Banking Sector: Time Series Analysis of Conventional And Islamic Banking In Pakistan
Abstract
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A well-developed financial and banking system efficiently transforms
savings into investments. The banking system of Pakistan is based on a dual
structure of conventional and Islamic banking. The current study aims to
identify the factors that determine growth in the banking industry of
Pakistan, keeping in view both conventional and Islamic banking. For this
purpose, the ARDL model was applied on the time series data of Pakistan
for the period 2007-2022. The data was taken from the State Bank of
Pakistan (SBP). The variable ‘investment’ was used as a proxy to measure
growth in the banking sector, comprising both conventional and Islamic
banking sectors. The results of the empirical analysis indicated that growth
in deposit, growth in GDP, and population growth are the main
determinants of growth in the banking sector of Pakistan. Based on the
findings of the study it is suggested that measures must be taken to increase
deposits in both systems of banking by giving various incentives to
households.
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