The study aims to examine the association between banking sector development, real exchange rates, inflation rates, federal discount rates, economic growth and bank deposits in Pakistan. The study employs Johansen co-integration method and Granger causality test. The empirical results confirm for the existence of a long run relationship between banking sector development and inflation, economic growth and federal discount rates. The results of Granger causality indicate that US interest rates affect the development of the Pakistani banking sector. This confirms the existence of spillover impact.
1-Muhammad Yusuf Amin PhD, Eastern Mediterranean University Famagusta, North Cyprus.2-Syed Imran Khan Lecturer, IBL, Abdul Wali Khan University, Mardan, KP, Pakistan.3-Noor Hassan PhD Scholar, Graduate Business School, Yeungnam University, South Korea.