Nexus between Debt and Economic Growth: Evidence from Pakistan

Amna Sohail Rawat ()
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Amna Sohail Rawat: University of Karachi

Journal of Finance and Economics Research, 2019, vol. 4, issue 2, 50-63

Abstract: The present study aims to analyse the link between external debt, domestic debt and economic growth for Pakistan. To serve the purpose, the study uses the data for the time period from 1987 to 2018. Various econometric techniques i.e, fully modified ordinary least squares model, dynamic ordinary least squares model have been employed to estimate the proposed model. The empirical findings suggested that there exist a negative relationship between growth and debt whether it is external or domestic. The study confirmed the existence of debt overhang effect in the economy. It is suggested that Pakistan should reduce her reliance on external and domestic debt and should concentrate over increasing their tax and non-tax revenues to finance fiscal expenditures.

Keywords: External debt; domestic debt; economic growth; Pakistan. (search for similar items in EconPapers)
Date: 2019
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