The role of commercial banks in the development of economy mohsin hassan alvi

Significance of the Study
The study can help in understanding the impact of banking sector on economic expansion of the country. The outcomes of the study can be helpful in producing laws and policies in order to strengthen financial factors in banks, which are affecting the economic development of country. There are several financial factors that put an impact on economic factors, or in other word, they become a cause of economic fluctuations and growth. This is very significance to find the status of impact of ROA on GDP and Balance of Trade weather positive or negative. Moreover, this is also vital to explain the coefficient magnitude and the level impact among variables. Banks are the sensitive in nature in controlling the fiscal policy of the stat because the play a major role in making decision from the general population to weather go for investment or saving with fixed interest rate.
Research Questions

1. 
   What is the role of banks’ Return on Asset (ROA) on economic fluctuations and growth?
   
2. 
   Does banks’ Return on Asset (ROA) play a vital role in economic situation in UK as compared to other developed countries of the world?
   

CHAPTER 2: LITERATURE REVIEW
Economists have different point of views regarding the impact of financial factors on economic factors. Due to an increase in economic growth worldwide, most of the countries are now focusing on gathering data on the factors, influencing economy. The relationship of economic factors and the change in economy has always been the topic of interest for many economists. This subject was first became the focus of attention by Bagehot (1873), Schumpeter (1912) and John Hicks (1969). According to them, the economical background in developed countries is rich due to strong industrialization. The industrialization was the outcome of financial stability and availability of resources. Strong financial system facilitates in mobilizing and introducing products and supporting financial capital. The growth of financial sectors produces opportunities to develop more financial institutes, such as growth of banking sector can help in expanding the sector by introducing new banks. The development of financial sectors again enhances financial growth, which leads to economical stability (Xu, 2000).