Debt and Economic Growth of Pakistan; Role of Uncertain Economic and Political Conditions

Muhammad Jalib Sikandar () and Fazale Wahid
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Muhammad Jalib Sikandar: PhD Candidate, Department of Economics, Islamia College, Peshawar
Fazale Wahid: Assistant Professor, Department of Economics, Islamia College, Peshawar.

Business & Economic Review, 2019, vol. 11, issue 2, 83-106

Abstract: This study is an attempt to investigate the role of political instability and economic uncertainty on debt and economic growth for the data span of 1975 to 2016 in Pakistan. We extract economic uncertainty by using Generalized Autoregressive Conditionally Heteroskedastic (GARCH) model. We explore the relationship between debt and economic growth simultaneously with Generalized Method of Moments (GMM) approach. The deep-rooted relation of political and economic uncertainty with debt and growth recommends immediate fiscal and public policy adjustments to minimize the harms of higher debt-GDP ratio and slow economic growth. This study results in the changing fiscal behavior with political shifts and confirms “the positive theory of debt†, by Alesinaand Tabellini (1989 and 1990), recommending stable political environment with consistent economic policies for Pakistan.

Keywords: Debt; Growth; Political Instability; Economic Uncertainty; Pakistan (search for similar items in EconPapers)
JEL-codes: D81 H63 O40 P16 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:bec:imsber:v:11:y:2019:i:2:p:83-106

DOI: 10.22547/BER/11.2.5

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