AN ANALYSIS OF THE MANAGEMENT OF FISCAL DEFICIT OF PAKISTAN: AN ECONOMETRIC STUDY OF AUTO-REGRESSIVE DISTRIBUTIVE LAGS (ARDL) APPROACH

Khurram Ejaz Chandia, Muhammad Badar Iqbal (), Saira Aziz, Ifra Gul () and Binesh Sarwar ()
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Khurram Ejaz Chandia: School of Public Affairs, University of Science and Technology of China, Hefei, P. R. China†Department of Management Sciences, COMSATS University Islamabad, Sahiwal Campus, Punjab, Pakistan
Muhammad Badar Iqbal: ��Department of Management Sciences, COMSATS University Islamabad, Sahiwal Campus, Punjab, Pakistan
Saira Aziz: ��School of Management, University of Science and Technology of China, Hefei, P. R. China†Department of Management Sciences, COMSATS University Islamabad, Sahiwal Campus, Punjab, Pakistan
Ifra Gul: �Independent Researcher.
Binesh Sarwar: School of Public Affairs, University of Science and Technology of China, Hefei, P. R. China

The Singapore Economic Review (SER), 2022, vol. 67, issue 02, 655-684

Abstract: Fiscal policy is an essential ingredient of economic performance. The fiscal policy is considered as a short-run measure; however, this has long-lasting outcomes for any economy. The current study has examined the connection among different constituents of fiscal policy, i.e., federal government revenues and federal government expenditures; federal government revenues and different components of federal government expenditures; federal government expenditures and different components of federal government revenues and fiscal deficit and influential budgetary variables in the context of the economy of Pakistan. The study has empirically investigated the relationship among the budgetary variables for Pakistan from 1979 to 2017. For data analysis, time-series econometric techniques such as auto-regressive distributive lag (ARDL) approach and Granger causality test have been employed. The results of ARDL bounds test approach suggest the existence of long-run equilibrium relationship among the variables. The result of CUSUM and CUSUMSQ shows the stability of functional relationship tested in this study, which means that model is a useful instrument for policymaking. So, a rise or fall in budgetary variables causes changes in fiscal deficit in long run. The results of study endorse the proof of spent-and-tax hypothesis in the economy of Pakistan. The study suggests the need for extensive fiscal policy reforms in Pakistan.

Keywords: Federal government revenues; federal government expenditure; indirect taxes; current expenditure; fiscal deficit (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1142/S0217590818500352

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