 Impact of Fiscal Policy on Pakistan's GDP: How Much and How Long?Shahzad Ahmad () and
Waliullah ()
No 117, SBP Working Paper Series from State Bank of Pakistan, Research Department Abstract: Implications of fiscal policy for Pakistan’s GDP have been evaluated through estimation of fiscal multipliers based on quarterly structural vector autoregressive models. Estimation results show that government consumption multiplier is positive only for initial two quarters and has a peak value of only 0.6. Government investment multiplier, initially depicting a weak and cyclical behavior, reaches a peak value of 1.5 in the eighth quarter. Net tax multiplier remains negative for initial five quarters. Subsequently, the stabilizing effects of consolidating fiscal policy exceed the initial output costs and the net tax multiplier becomes positive to attain its peak value of 1.12 in 13th quarter. These results confirm that the use of consumption based expansionary fiscal policy to boost real GDP growth has no empirical support in case of Pakistan.Fiscal consolidation has positive effects on medium term growth outcomes. Keywords: Fiscal policy; National Government Expenditure; VAR Model (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:sbp:wpaper:117 Access Statistics for this paper More papers in SBP Working Paper Series from State Bank of Pakistan, Research Department Contact information at EDIRC. |
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