Small and medium-sized enterprises and economic growth in Pakistan: An ARDL bounds cointegration approach

Abstract

This study examines the relationships between small and medium-sized enterprises (SMEs) and economic growth in Pakistan from 1990 to 2019. It focuses on SMEs and the other factors responsible for the economic growth by evaluating their effects in the long-run and short-run by employing the autoregressive distributed lag bounds cointegration approach. In the long-run, the SME's output, human development index, and credit to the SME sector's expansion are identified as the main driving force behind economic growth. However, in the short-run, SME's output, human development index, credit to SME, and annual export rate are the main drivers of economic development. Empirical results are important to policy makers to promote, stimulate and support the growth of small and medium-sized enterprises through their strategies.

Keywords

• SMEs
• Economic development
• Autoregressive distributed lag
• Cointegration
• Pakistan