Constructive Role of Idle Cash in Pakistan: An Empirical Analysis

Abstract

Idle cash is a short-run phenomenon that turns into active cash and enhances the pace of economic growth. People for short period keep away a part of their cash from the running flow of transaction and injects it into transactions or speculative stream in long run. Low-interest rate discourages savers to earn money so people prefer to keep their money at home. Savers wait to make a positive investment in the long run. In this paper dual estimation techniques i.e., Frequentist and Bayesian are applied over the time period of 1995-2018 in the case of Pakistan. Findings show that households’ idle cash has a positive impact on the economic growth of Pakistan. On the basis of findings, it can be recommended that a safe investment environment should be provided to households as it will not only enhance the growth of Pakistan’s economy but also tackle other problems like unemployment and poverty.