Money Monetization and Economic Growth in Pakistan

Purpose: It is observed and widely accepted theory among the economists; money plays significant role in determining economic growth of a country. Methodology: In this study; focus was on understanding the relationship between; money, monetization and economic growth of Pakistan. We based my study on endogenous growth theory; helps in empirical testing of Standard Growth Model consist of Dependent Variable; Gross Domestic Product (GDP) per capita and Independent Variables; Inflation, Income disparity, Investment, stock market price, money supply (M2). Auto Regressive Distributive Lag (ARDL) Approach is used to bind the testing to cointegration; which is used to check long equilibrium relationship between all variables in the model. And to check the short term relationship between money supply and economic growth; Error Correction Model is applied to the study. We use series data followed the range 1980-2012 for this study and results of cointegration show that, variables are co-integrated with a long term equilibrium relationship. Findings: We found that error correction term is negative and significant. Recommendations: This study open new directions for further research.