Empirical Analysis of Fiscal Sustainability and Optimal Level of Debt in Pakistan
Keywords:
fiscal sustainability; public debt; total revenues; govt expenditures; ARDL approach
Abstract
Through the current study it’s been tried to discuss that how fiscal sustainability is impacted by the debt which is taken by countries in order to push their economy towards prosperity and growth in Pakistan. Because the economy is considering vulnerable in terms of Public debt due to huge fiscal deficit in the economy. The ARDL approach is being applied by taking GDP as dependent variable while public debt, total revenues, government expenditures and interest rate are been taken as independent variable. The findings of the study suggested that there is strong and significant relationship exist between focused variables. Public debt is negatively associated with GDP in both short run and long run, while government expenditure give positive and significant relationship with GDP and interestingly total revenue give negative significant relationship in long run that supported the argument that the high revenues in developing nations inversely affects the investment that is pillar of GDP, so it adversely affected. The interest rate is positively significant in long run but in short run its negatively related with GDP because it affects cost of capital. The findings of study attract the attention of policy makers that we need either debt reduction strategies or either to minimize the gap between public revenues and public expenditures to promote sustain economic growth in the economy.
Downloads
Download data is not yet available.
References
Ademola, I. S. (2012). Government Expenditure in the Manufacturing sector and Economic Growth 1980-2010. International Journal of Scientific and Engineering Research, 3, 1-6.
Afonso, A., & Jalles, J. T. (2012). Revisiting Fiscal Sustinability: Panel Cointegration and Structural Breaks in OECD Countries. OECD Working Paper.
Afonso, A., Nickel, C., & Rother, P. C. (2006). Fiscal Consolidations in the Central and Eastern European Countries. Review of World Economics, 402-421.
Ahmad, N. (2000). Export Response to Tade Liberalization in Bangladesh:A cointegration Analysis. Applied Economics, 32(8), 1077-1084.
Akhatar, N., Padda, I. U., Khan, M., & Hussain, M. I. (2011). Fiscal Situation in Pakistan and its consequences for Economic Growth and Poverty. American International Journal of Contemporary Research, 1(1).
Akhram, N. (2015). Is Public Debt Hindering Economic Growth of the Philippines? International Journal of Social Economics.
Akram, N. (2011). Impact of Public Debt on the economic growth of Pakistan. The Pakistan Development Review, 599-615.
Akram, N., Muhammad, K., & Husnain, M. I. (2007). Fiscal Situation in Pakistan and its Consequences for Economic Growth and Poverty. Economic Survey.
Al Gifari, H. (2015). The effects of government expenditure on economic growth: the case of Malaysia. Munich Personal RePEc Archive.
Amjad, A., & Marc, A. (2018). Macroeconomic Environment and Taxes Revenues in Pakistan: An Application of ARDL Approach. Munich Personal RePEc Archive.
Azam, A. (2020). The Comparative Analysis of the Industrial Policy Impact on Export Performance in the Military and Democratic Regime of Pakistan. Virtual Economics, 61-76.
Azam, A. (2020). The Impact of Industrial Policy on Export Diversification: Some Empirical Evidences from Pakistan. Technium Social Sciences Journal, 84-96.
Baum, A., Checherita, W. C., & Rother, P. (2013). Debt and Growth; New Evidence for teh Euro Area. Journal of International Money and Finance, 809-821.
Bhardwaj, A. (2018). Financial Leverage and Firm's Value: A Study of Capital Structure of Selected Manufacturing Sector Firms in India.
Burke, S., & Hunter, J. (2005). Modelling Non-Stationary Economic Time Series: A Multivariate Approach. Springer.
Chandia, K. E., & Javid, A. Y. (2013). An analysis of debt sustainability in the economy of Pakistan. Procedia Economics and Finance, 133-142.
Chowdhury, A. (2001). External Debt and Growth in Developing Countries: A Sensitivity and Causal Analysis. WIDER Discussion Paper, 2001/95.
Hussain, R., & Anjum, G. A. (2014). Worker’s Remittances and GDP Growth in Pakistan. International Journal of Economics and Financial Issues, 376-381.
Ibrahim, A. (2014). Asia After the Crisis: Recovery and Reform. Konfrontasi Jurnal Kultural Ekonomi Dan Perubahan Sosial, 1(1), 26-29.
Iqbal, N., Din, M. U., & Ghani, E. (2017). The Fiscal Deficit and Economic Growth in Pakistan: New Evidence. The Lahore Journal of Economics, 53-72.
Iqbal, Z., & Sattar, A. (2003). The Contribution of Worker Remittances to Economic Growth in Pakistan. Pakistan Institute of Development Economics: Working Paper.
Irfan, M. (2011). Remittances and poverty linkages in Pakistan: Evidence and some suggestions for further analysis. Pakistan Institute of Development Economics: Working Paper.
Khan, A. H., & Saqib, N. (1993). Economic Development and International Trade. International Economic Journal, 7(3), 53-64.
Khan, M. I. (2011). Foreign Direct Investment in Pakistan: The Role of International Political Relations. University of Oxford, Department of International Development, ISSN, 2045-5119.
Kharusi, S. A., & Ada, M. S. (2018). External Debt and Economic Growth: The Case of Emerging Economy. Journal of Economic Integration, 1141-1157.
Lahirushan, K. P., & Gunasekara, W. G. (2015). The Impact of Government Expenditure on Economic Growth: A Study of Asian Countries. International Journal of Social, Behavioral, Educational, Economic, Business and Industrial Engineering.
Mahmood, A., & Ahmad, W. (2017). Export Performance of Pakistan: Role of Structural Factors. State Bank of Pakistan.
Mathew, J., & Patrick, K. W. (2017). The General Error Correction Model in Practice. Research in Politics, 4(2).
Mupunga, N., & Roux, P. L. (2014). Analyzing the Theoretical and Empirical Foundations of Public Debt Dynamics in Zimbabwe. Economic Research Southern Africa, 1-20.
Nikoloski, A. (2020). Influence of Public Revenues on Economic Growth: The CAse of the Republic of North Macedonia. Konfrontasi: Jurnal Kultural, Ekonomi Dan Perbahan Sosial, 7(3), 191-204.
Rahman, A. U. (2019). Detecting Stationary of GDP: A test of Unit Root. Journal of Quantitative Methods, 8-37.
Ram, R. (1988). Additional Evidence on Causality between Government Revenue and Government Expenditure. Southern Economic Journal , 763-769.
Shafqat, M., Ahmad, A., & Banu, S. (2014). Impact of Worker Remittances on Economic Growth of Pakistan: Analysis of Pakistan’s Economy. Journal of Business Research Turk, 6-14.
Siddique, R. (2006). The Pakistani Economy: Preferences and Challanges. The Muslim World, 251-268.
Siddiquie, A. H. (2018). Export Diversification and Growth in Pakistan: Emperical Investigation from 1972-2015. Business & Economic Review, 107-132.
Zahoor, M. A. (1988). A critical Appraisal of Economic Reforms Under Bhutto. The Political Economy of Pakistan.
Zikmund, W. G. (2003). Basic Data Analysis: Descriptive Statistics. Health Economics Research Methods, 1-43.
Zinaz, A., & Khatoon, S. (2009). Government Expenditure and Tax Revenue, Causality and Cointegration: The Experience of Pakistan (1972–2007). The Pakistan Development Review, 951-959.
Afonso, A., & Jalles, J. T. (2012). Revisiting Fiscal Sustinability: Panel Cointegration and Structural Breaks in OECD Countries. OECD Working Paper.
Afonso, A., Nickel, C., & Rother, P. C. (2006). Fiscal Consolidations in the Central and Eastern European Countries. Review of World Economics, 402-421.
Ahmad, N. (2000). Export Response to Tade Liberalization in Bangladesh:A cointegration Analysis. Applied Economics, 32(8), 1077-1084.
Akhatar, N., Padda, I. U., Khan, M., & Hussain, M. I. (2011). Fiscal Situation in Pakistan and its consequences for Economic Growth and Poverty. American International Journal of Contemporary Research, 1(1).
Akhram, N. (2015). Is Public Debt Hindering Economic Growth of the Philippines? International Journal of Social Economics.
Akram, N. (2011). Impact of Public Debt on the economic growth of Pakistan. The Pakistan Development Review, 599-615.
Akram, N., Muhammad, K., & Husnain, M. I. (2007). Fiscal Situation in Pakistan and its Consequences for Economic Growth and Poverty. Economic Survey.
Al Gifari, H. (2015). The effects of government expenditure on economic growth: the case of Malaysia. Munich Personal RePEc Archive.
Amjad, A., & Marc, A. (2018). Macroeconomic Environment and Taxes Revenues in Pakistan: An Application of ARDL Approach. Munich Personal RePEc Archive.
Azam, A. (2020). The Comparative Analysis of the Industrial Policy Impact on Export Performance in the Military and Democratic Regime of Pakistan. Virtual Economics, 61-76.
Azam, A. (2020). The Impact of Industrial Policy on Export Diversification: Some Empirical Evidences from Pakistan. Technium Social Sciences Journal, 84-96.
Baum, A., Checherita, W. C., & Rother, P. (2013). Debt and Growth; New Evidence for teh Euro Area. Journal of International Money and Finance, 809-821.
Bhardwaj, A. (2018). Financial Leverage and Firm's Value: A Study of Capital Structure of Selected Manufacturing Sector Firms in India.
Burke, S., & Hunter, J. (2005). Modelling Non-Stationary Economic Time Series: A Multivariate Approach. Springer.
Chandia, K. E., & Javid, A. Y. (2013). An analysis of debt sustainability in the economy of Pakistan. Procedia Economics and Finance, 133-142.
Chowdhury, A. (2001). External Debt and Growth in Developing Countries: A Sensitivity and Causal Analysis. WIDER Discussion Paper, 2001/95.
Hussain, R., & Anjum, G. A. (2014). Worker’s Remittances and GDP Growth in Pakistan. International Journal of Economics and Financial Issues, 376-381.
Ibrahim, A. (2014). Asia After the Crisis: Recovery and Reform. Konfrontasi Jurnal Kultural Ekonomi Dan Perubahan Sosial, 1(1), 26-29.
Iqbal, N., Din, M. U., & Ghani, E. (2017). The Fiscal Deficit and Economic Growth in Pakistan: New Evidence. The Lahore Journal of Economics, 53-72.
Iqbal, Z., & Sattar, A. (2003). The Contribution of Worker Remittances to Economic Growth in Pakistan. Pakistan Institute of Development Economics: Working Paper.
Irfan, M. (2011). Remittances and poverty linkages in Pakistan: Evidence and some suggestions for further analysis. Pakistan Institute of Development Economics: Working Paper.
Khan, A. H., & Saqib, N. (1993). Economic Development and International Trade. International Economic Journal, 7(3), 53-64.
Khan, M. I. (2011). Foreign Direct Investment in Pakistan: The Role of International Political Relations. University of Oxford, Department of International Development, ISSN, 2045-5119.
Kharusi, S. A., & Ada, M. S. (2018). External Debt and Economic Growth: The Case of Emerging Economy. Journal of Economic Integration, 1141-1157.
Lahirushan, K. P., & Gunasekara, W. G. (2015). The Impact of Government Expenditure on Economic Growth: A Study of Asian Countries. International Journal of Social, Behavioral, Educational, Economic, Business and Industrial Engineering.
Mahmood, A., & Ahmad, W. (2017). Export Performance of Pakistan: Role of Structural Factors. State Bank of Pakistan.
Mathew, J., & Patrick, K. W. (2017). The General Error Correction Model in Practice. Research in Politics, 4(2).
Mupunga, N., & Roux, P. L. (2014). Analyzing the Theoretical and Empirical Foundations of Public Debt Dynamics in Zimbabwe. Economic Research Southern Africa, 1-20.
Nikoloski, A. (2020). Influence of Public Revenues on Economic Growth: The CAse of the Republic of North Macedonia. Konfrontasi: Jurnal Kultural, Ekonomi Dan Perbahan Sosial, 7(3), 191-204.
Rahman, A. U. (2019). Detecting Stationary of GDP: A test of Unit Root. Journal of Quantitative Methods, 8-37.
Ram, R. (1988). Additional Evidence on Causality between Government Revenue and Government Expenditure. Southern Economic Journal , 763-769.
Shafqat, M., Ahmad, A., & Banu, S. (2014). Impact of Worker Remittances on Economic Growth of Pakistan: Analysis of Pakistan’s Economy. Journal of Business Research Turk, 6-14.
Siddique, R. (2006). The Pakistani Economy: Preferences and Challanges. The Muslim World, 251-268.
Siddiquie, A. H. (2018). Export Diversification and Growth in Pakistan: Emperical Investigation from 1972-2015. Business & Economic Review, 107-132.
Zahoor, M. A. (1988). A critical Appraisal of Economic Reforms Under Bhutto. The Political Economy of Pakistan.
Zikmund, W. G. (2003). Basic Data Analysis: Descriptive Statistics. Health Economics Research Methods, 1-43.
Zinaz, A., & Khatoon, S. (2009). Government Expenditure and Tax Revenue, Causality and Cointegration: The Experience of Pakistan (1972–2007). The Pakistan Development Review, 951-959.
Published
2020-12-13
How to Cite
Sehrish Haleem, Awais Khan, & Malik Adeel Ur Rahman. (2020). Empirical Analysis of Fiscal Sustainability and Optimal Level of Debt in Pakistan. Konfrontasi: Jurnal Kultural, Ekonomi Dan Perubahan Sosial, 7(4), 282-292. https://doi.org/10.33258/konfrontasi2.v7i4.126
Section
Articles
Copyright (c) 2020 Konfrontasi: Jurnal Kultural, Ekonomi dan Perubahan Sosial
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
Authors who publish with this journal agree to the following terms:
- Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under Creative Commons Attribution 4.0 International License that allows others to share the work with an acknowledgement of the work's authorship and initial publication in this journal.
- Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in this journal.Penulis.
- Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (Refer to The Effect of Open Access).
_.gif)
_.gif)
