Fiscal Discretion and Its Impact on Pakistan Economy

Muhammad Ismail and Fazal Husain
Additional contact information
Muhammad Ismail: University of Central Punjab, Rawalpindi Campus
Fazal Husain: Department of Economics, Pakistan Institute of Development Economics, Islamabad.

The Pakistan Development Review, 2012, vol. 51, issue 4, 339-364

Abstract: This paper studies the discretionary fiscal policy, its size and particularly the impact of discretionary government spending on output, employment level and inflation over the period of 39 years from 1971-72 to 2009-10. The discretionary fiscal policy is identified through the residual term (based on a fiscal reaction function), political system and market structure. Antonio Fatás and Ilian Mihov (2003) model is amended by including employment level and inflation for quantitative estimates of discretionary policy then this discretion is regressed against output, employment level and inflation variation. The paper finds the presence of fiscal discretion but this discretion does not influence the output, employment and inflation significantly. It attempts to highlight the succinct merits and demerits of the debated discretionary fiscal policy for Pakistan economy. Lastly it suggests a political and economically suitable policy framework to be made available to public policy-makers for discretionary policy conduct so that desired influence on economic variables could be achieved.

Keywords: Discretionary Fiscal Policy; Output; Employment; Market Structure (search for similar items in EconPapers)
Date: 2012
References: Add references at CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://www.pide.org.pk/pdf/PDR/2012/Volume4/339-364.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pid:journl:v:51:y:2012:i:4:p:339-364

Access Statistics for this article

More articles in The Pakistan Development Review from Pakistan Institute of Development Economics Contact information at EDIRC.
Bibliographic data for series maintained by Khurram Iqbal ().