Estimating the growth effects of services sector: a cointegration analysis for Pakistan

Abstract

This article empirically tests the hypothesis of Pugno (Struct Change Econ Dyn 17:99–115, 2006 ) that both business- and household-related services contribute in the economic growth of the country in the case of Pakistan over the period of 1960–2014. To accomplish the task, the study uses Johansen–Juselius cointegration test and autoregressive distributed lag bounds test to test the long-run relationship between the services sector and the economic growth of Pakistan. The tests reveal that the services sector has a long-run relationship with the economic growth of Pakistan. Furthermore, the estimation of cointegrating vector shows that the services sector positively contributes in the economic growth of Pakistan.

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