Effects of inflation (consumer price index) and other macroeconomic variables on bank deposits: Evidence from Pakistan

Effect of inflation (CPI) and other macroeconomic variable on bank deposits is the empirical issue in many countries but in Pakistan there is no significant work have been done about this relationship. This paper investigates the effect of different macroeconomic variables on bank deposits in Pakistan by using time series data from 1960 to 2010.Least square method and multiple regression model was used to analyze the data. The results clearly indicate that there is a negative relationship between inflation and bank deposits. Other macroeconomic variable which includes broad money, deposit rates, GDP and per capita income have positive impact on bank deposits. It is concluded that by efficient fiscal and monetary policy we can manage this macroeconomic variable in order to increase bank deposits. Per capita income can be increase by different policies and by reducing unemployment. Banks can play a vital role with the help of Government in order to manage these macroeconomic variables by using different policies and step to minimize the effects of these variables.