Fiscal Policy and Macroeconomic Stability in South Asian Countries

Nimra Riaz and Kashif Munir

MPRA Paper from University Library of Munich, Germany

Abstract: The objective of this study is to examine relationship between fiscal policy and macroeconomic stability in South Asian countries. The study also aimed to find the channels through which fiscal policy leads to macroeconomic stability i.e. automatic stabilizers, discretionary fiscal policy and cyclical fiscal policy. For attaining these objectives the study used data from 1990 to 2014. The study used Pooled OLS and Instrumental Variable Least Square methodology. Results indicate that automatic stabilizers and discretionary fiscal policy have destabilizing impact on economy which leads to decrease in economic growth of developing economies. Cyclical policy plays an important role in stabilizing the economy and growth of a country. The study concluded that automatic stabilizers and discretionary policy are weak in developing economies. Government should use cyclical policy for macroeconomic stability in developing countries.

Keywords: Fiscal Policy; Macroeconomic Stability; Channels; Panel Data; South Asia (search for similar items in EconPapers)
JEL-codes: C23 E62 O11 O53 (search for similar items in EconPapers)
Date: 2016-09-09
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Fiscal Policy and Macroecomonic Stability in South Asian Countries (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:74247

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