92 Determinant of Financial Development Evidence from selected Developing Countries

This paper attempts to determine the effect of tax revenue, government spending, inflation rate, interest rate, exchange rate on the financial development (FD) in developing countries. Secondary data have been used in this research that was taken from Global Financial Index and WDI for the 36 years from 1980-2015. A Panel ARDL model is used to establish for long extent of time of time and short period of time communication among the product variable. So, to determine a statistics test are used such as descriptive statistics, unit rot test, granger causality test have been utilized in this research for driven conclusion. There is a positive and statistically significant connection between the tax revenue, government spending, and exchange rate on financial development. Other hand, there is a statistically significant and negative connection between the interest rate and inflation rate on financial development. Key word: Financial development, Tax revenue, Government spending, Inflation rate, Interest rate and Exchange rate. Financial development is the components of private sectors. Development approach encourages the economic development and poverty. The mechanism of the condensing cost of achieve facts, accomplish contracts and the assassinate transaction determinants in the rising financial contracts mediators and market. The more important to financial development is involved the established and enlargement of institution instrument and market that support this financing and development process. In simple words, financial development measures few improvements in generating facts about the achievable investment and the assign capital, control firms and existing corporate governance, trading, assortment, and the executives of risk, demonstration and merge of accumulation, alleviate the exchange of goods and services. Moreover, these financial reacts put impact on provision for future and investment decision and technological innovation sand for that reason economic growth. While some good researchers believe that financial development had a strongly effect on economic growth. Four different views are properly determined by Al-Yousif (2012) the first is the stock driving perspective as per which financial development has a positive effect on economic growth. Supporters of this outlook contend that budgetary intermediation adds to financial development by raising the effectiveness of capital amassing and the turn peripheral profitability of capital. Financial intermeddlers it also increases the saving rate and the investment rate which have to economic growth. As a key price affected of the financial system although there are many channels like inference of real exchange for the financial development increasing the focus of the awareness to the current policy argue. The most important reason in the rare increasing the attention of the financial put impact of real exchange rate in the development experience of the East Asian countries and they have evaluate the practice of a successful part of the export maintain a willing to oppose and constant the policy of exchange rate. 12 Superior College Lahore; Corresponding author Email: maliktayyabali.superior@gmail.com On the alternative way we can say that the alternative determinants of the financial effect of the exchange rate perform the exclusive area of the financial position as enlarge the responsibilities of dollarization in developing countries. The liability dollarization processes generate the currency and the sophistication difference among the debt and the revenue of the corporation, and the devaluation of the real exchange rate have tendency and thus the decline of the economic activity in development countries. The financial development in developing countries had a vital subject matter of the study argue for a long-term time. An important determinants of a financial development structure is that to intermediates, connecting the lender and the borrowers so that the both parties can be reduced the transaction and the information cost.