DefinePK

Abstract

The investigation of influence of macroeconomic variables on economic growth remained hotissue for decades. And nowadays increasing importance of Islamic banking and financeindustry in Pakistan and its tremendous role in global financial sector has also called for anexamining of contribution of Islamic finance in economic growth of Pakistan. This study alsocompared result of both variables in order to show whether Islamic banking showing greatprogress or not. So, in order to investigate impact of Islamic finance and macroeconomicvariables on economic growth this study used quarterly data from 2009-16 and applies boundtesting cointegration technique made within in “Autoregressive distributed lag model”. Theresult shows that both variables have an influence on economic growth in short run as well asin long run. By comparison of both variables it is shown that Islamic banking possess greatpotential of growth. So, government may need to refine its legal and regulatory framework inorder to increase its impact on economy up to many folds