Master of Science in Economics

Faculty / School

Faculty of Business Administration (FBA)


Department of Economics

Date of Submission



Dr. Mohammad Nishat, Institute of Business Administration, Karachi

Project Type

MSECO Research Project

Access Type

Restricted Access


We analyze impact of macroeconomic volatility on the soundness of financial sector of Pakistan. Since financial sector of Pakistan is dominated by banking sector, we focus our analysis on the soundness of banking sector. From the list of Financial Soundness Indicators, we choose Non-Performing Loan Ratio for analysis mainly because of its economic intuition and data availability. Using quarterly data from year 2000:Q3 to year 2015:Q4, we employ Recursive Vector Auto Regression framework for conducting our analysis. Variables of interest used in this report are Non-Performing Loan Ratio (NPLR), Output Gap (OG), Inflation (INF) and Policy Rate. Our findings indicate that macroeconomic variables indeed influence performance of banking sector.


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