Abstract:

This empirical study followed structural vector auto regression (SVAR) approach proposed by the so-called AB-model of Amisano and Giannini (1997) to find out relevant macroeconomic determinants of services sector growth in Pakistan. Before that ARDL bound testing and TVP approach with general to specific approach were employed to get relevant significant determinants of services sector growth. No author made such a study that captures all above methodologies in empirical literature but current study will bridge this gap. Annual data was taken from World Development Indicators (2014) during period 1976-2014. The widely-used Schwarz information criterion and Akaike information criterion were considered for the lag length in estimated equation. Inflation (cpi) is found to be the best positive relevant significant determinants of services sector while remittances received (rem) and gross national expenditures (gne) and Foreign direct investment (fdi) are affecting negatively the services sector output growth (yt). Based on these empirical findings, we conclude that government should focus on service sector growth augmenting factors while formulating any policy relevant to the concerned sector.