Impact of Fiscal Policy on GDP Growth Rate: a Case of Pakistan

Document Type: Case Study

Authors

1 Women University Multan, Multa, Punjab Province, Multa, Pakistan

2 Women University Multan, Punjab Province, Multan, Pakistan

3 Center for Industrial and Business Organization, Dongbei University of Finance and Economics, Dalian, Liaoning Province, China

Abstract

Fiscal policy plays a key role in the economic growth of every country. In this article, we investigate the impact of fiscal policy on economic growth in case of Pakistan by using time series data from 1981-2016. For analysis, we built a model of gross national expenditure and applied autoregressive distributed lag model for empirical analysis this study on the base of bound test value. The result indicates that gross national expenditure had a positive relationship with the growth rate. Moreover, industry value added had a positive and significant relation with growth rate because since countries with reliable industrial sector results in more development and growth.

Keywords


Ahmad, M. I., Rehman, R., & Raoof, A. (2010). Do interest rate, exchange rate effect stock returns? A Pakistani perspective. International Research Journal of Finance and Economics50, 146-150.
Afonso, A., & Sousa, R. M. (2011). The macroeconomic effects of fiscal policy in Portugal: a Bayesian SVAR analysis. Portuguese Economic Journal10(1), 61-82.
Afonso, A., Agnello, L., & Furceri, D. (2010). Fiscal policy responsiveness, persistence, and discretion. Public Choice145(3-4), 503-530.
Afonso, A., Grüner, H. P., & Kolerus, C. E. (2010). Fiscal policy and growth: Do financial crises make a difference?.
Ahmed, V., Talpur, M., & Liaqat, S. (2015). Towards a fair and just fiscal policy in Pakistan. Oxfam GB for Oxfam International.
Alesina, A., & Ardagna, S. (2010). Large changes in fiscal policy: taxes versus spending. Tax policy and the economy24(1), 35-68.
Al-Masaeed, A. A., & Tsaregorodtsev, E. (2018). The Impact of Fiscal Policy on the Economic Growth of Jordan. International Journal of Economics and Finance10(10), 145-145.
Aloy, M., Moreno-Dodson, B., & Nancy, G. (2002, January). Fiscal Policy and Growth: An Application to Sub Saharan Economies. In Proceedings. Annual Conference on Taxation and Minutes of the Annual Meeting of the National Tax Association (Vol. 95, pp. 300-307). National Tax Association.
Auerbach, A. J., & Gale, W. G. (2009). Activist fiscal policy to stabilize economic activity (No. w15407). National Bureau of Economic Research.
Auerbach, A. J., & Gorodnichenko, Y. (2012). Measuring the output responses to fiscal policy. American Economic Journal: Economic Policy4(2), 1-27.
Chandio, A. A., Jiang, Y., Rehman, A., Jingdong, L., & Dean, D. (2016). Impact of government expenditure on agricultural sector and economic growth in Pakistan. American-Eurasian J. Agric. & Environ. Sci16(8), 1441-1448.
Chandio, A. A., Jiang, Y., Rehman, A., Jingdong, L., & Dean, D. (2016). Impact of government expenditure on agricultural sector and economic growth in Pakistan. American-Eurasian J. Agric. & Environ. Sci16(8), 1441-1448.
Fernández-Villaverde, J., Guerrón-Quintana, P., Kuester, K., & Rubio-Ramírez, J. (2015). Fiscal volatility shocks and economic activity. American Economic Review105(11), 3352-84.
Fazzari, S. M., Morley, J., & Panovska, I. (2011). State-Dependent E ects of Fiscal Policy.
Fu, D., Taylor, L. L., Yücel, M. K., & Dallas, F. R. B. O. (2003). Fiscal policy and growth (Vol. 3, No. 1). Dallas, TX: Federal Reserve Bank of Dallas.
Gechert, S. (2015). What fiscal policy is most effective? A meta-regression analysis. Oxford Economic Papers67(3), 553-580.
Horton, M., & El-Ganainy, A. (2009). What Is Fiscal Policy?. Finance & Development46(2), 52-53.
Hanif, M. N., & Arby, M. F. (2003). Monetary and fiscal policy coordination.
Hayat, U., Mohammad, J., Rabbi, F., & Shah, T. (2017). Assessing the dynamic effects of fiscal policy shocks in selected leading and lagging economies.
Hussain, S., Ahmad, W., Qamar, Y., & Akram, M. S. (2019). Impact of Inflation, CO2 Emissions and Foreign Investment on Economic Growth: A Case of Pakistan. Asian Development Policy Review7(4), 307-317.
Hussain, S., Akram, M. S., Ghaffar, A., Qamar, Y., & Ahmad, W. (2019). Impact of Foreign Investment, Labor Force and Interest Rate on Economic Growth: A Case of Pakistan (Under CPEC Project Contribution Countries). Asian Development Policy Review7(4), 369-377.
Ismail, M., & Husain, F. (2012). Fiscal discretion and its impact on Pakistan economy. The Pakistan Development Review, 339-362.
Jawaid, S. T., Arif, I., & Naeemullah, S. M. (2010). Comparative analysis of monetary and fiscal policy: A case study of Pakistan.
Kakar, Z. K. (2011). Impact of fiscal variables on economic development of Pakistan. Romanian Journal of Fiscal Policy (RJFP)2(2), 1-10.
Mubarik, Y. A., & Riazuddin, R. (2005). Inflation and growth: An estimate of the threshold level of inflation in Pakistan. Karachi: State Bank of Pakistan.
Mehmood, S. (2012). Effect of different factors on gross domestic product: a comparative study of Pakistan and Bangladesh. Academy of contemporary research journal1(1), 18-35.
Ongo, E. N., & Vukenkeng, A. W. (2014). Does gross capital formation matter for economic growth in the CEMAC sub-region?. EuroEconomica33(2).
Popa, I., & Codreanu, D. (2010). Fiscal Policy and its role in ensuring economic stability.
Riaz, N., & Munir, K. (2016). Fiscal Policy and Macroeconomic Stability in South Asian Countries.
Sacchi, A., & Salotti, S. (2015). The impact of national fiscal rules on the stabilisation function of fiscal policy. European Journal of Political Economy37, 1-20.
Syed Ali Sajjad “Pakistan’s unfortunate issue of brain drain” January 22,2018
Shahid, M., Qayyum, A., & Shahid Malik, W. (2016). Fiscal and Monetary Policy Interactions in Pakistan Using a Dynamic Stochastic General Equilibrium Framework.
Swanson, R. A., & Chermack, T. J. (2013). Theory building in applied disciplines. Berrett-Koehler Publishers.
Shaheen, S., Ali, M. M., Kauser, A., & Ahmed, F. B. (2013). Impact of trade liberalization on economic growth in Pakistan. Interdisciplinary Journal of Contemporary research in business5(5), 228-240.
Subhani, M. I. (2010). Impact of Fiscal Policy on the Economy of Pakistan.
Tanzi, V., & Zee, H. H. (1997). Fiscal policy and long-run growth. Staff Papers44(2), 179-209.
Wierzbowska, A., & Shibamoto, M. (2018). Cross-country evidence on determinants of fiscal policy effectiveness: the role of trade and capital flows. Applied Economics50(32), 3493-3514.