Assignment No 2

Submitted To

Sir Ahmed Ghazali

Submitted By

Muhammad Abbas

Roll No

14011554-036

Subject

Research methods in business

Topic

Research Article

BS Banking & Finance

University of Gujrat
 Analyzing the link between banking sector stability & real economic
growth

Research Question

What are the factors that help in analyzing the link between banking
sector stability and real economic growth.

Research Objective

Analyzing the factors which contribute to increase banking sector

stability and its impact on real economic growth.

Problem Statement

This study focuses on the Pakistani banking sector to examine the

relevance of factors which contributes to increase banking sector
stability & its impact on real economic productivity.

Hypothesis

Alternate Hypothesis= Banking sector stability has a strong relationship

with real economic productivity.

Null Hypothesis= Banking sector stability has not strong relationship

with real economic productivity.

We will try to proof alternate hypothesis and try to reject null

hypothesis.
Literature Review
The relationship between financial development and economic
growth is a controversial issue.Some authors consider finance an
important element of growth (Schumpeter, 1934;
Goldsmith,1969; McKinnon, 1973; Shaw, 1973; King and
Levine (1993). Our paper focuses on the role of financial
development in the economic growth of CESEE
countries in the post-communist era, the GFC and the period
afterwards. Financial Development and Economic Growth:
The Role of Foreign-Owned Banks in CESEE Countries
Paola Bongini 1, Magorzata Iwanicz-Drozdowska 2,*,
The real sector is strategic to the growth of any economy. A
vibrant real sector guarantees increase in the pace of economic
growth. For the real sector to be vibrant, a developed financial
sector must exist. The industrial sector is a key segment of the
real sector in Nigeria and has annually contributed more than
15% to her economy in the 21st century. (International Journal
of Academic Research in Business and Social Sciences June
2015, Vol. 5, No. 6) A close mutual relationship exists between
the financial sector and real economy. Capital can trigger
economic growth. On the other hand, financial wealth cannot
sustain itself indefinitely without an adequate "real economy"
foundation. Dietmar Peetz and Heribert Genreith (Institute for
Applied Risk Management, Germany). Social and economic
nature and institutional form of interaction of the real and
financial sectors are changing with the development of the
economic system.
(International Journal of Economics and Financial Issues, 2015,
5(Special Issue) 281-286.) There is emerging evidence that
financial deepening promotes economic development only up to
a certain size of financial systems relative to GDP, and that too
much finance may actually harm economies.( Effects of
Financial System Size and Structure on the Real Economy). To
examine the linkages between the real sector and the financial
sector, this study constructed four models to understand the
contribution of each of the financial sectors to the output growth
in Malaysia. (AAMJAF, Vol. 8 (Supp. 1), 93113, 2012 ASIAN
ACADEMY of MANAGEMENT JOURNAL of
ACCOUNTING)
Economatric Model
Real Economic Growth = f(Model intercept,banking sector
stability, Loan Sizes, Interest rate fluctioations, Error Term)
Graphical representation

Banking sector stability

Real Economic Grorth