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The Relative Effectiveness of Monetary and Fiscal Policies in Economic Growth: A Case Study of Pakistan

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Author Info

  • Tariq Mahmood

    (Graduate Student, Department of Economics, University of Sargodha.)

  • Maqbool Hussain Sial

    (Dean Faculty of Management Sciences, University of Sargodha)

Abstract

In this study the role of monetary and fiscal policies in economic growth of Pakistan is studied using time series data for the period 1973-2008. The objective of this study is to discover the ways by which fiscal and monetary policies can be established to boost economic growth, highlight present Pakistan fiscal and monetary challenges to discover regions which may yield upgrading to the fiscal and monetary framework and consequently increase employment opportunities and the budget revenues in Pakistan. The augmented Dickey Fuller unit root procedure is used to check the time series properties. The Autoregressive Distributed Lag Model technique is used to find the long-run relationship between fiscal /monetary policy and economic growth. The results show that monetary and fiscal policies both play a significant role in the economic growth of Pakistan. The relationship between GDP and Government Current Expenditure (GCE) is found to be negative while, Currency in Circulation (CIR) and Government Development Expenditure (GDE) affect GDP positively in case of Pakistan.

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Bibliographic Info

Article provided by Asian Economic and Social Society in its journal Asian Economic and Financial Review.

Volume (Year): 1 (2011)
Issue (Month): 4 (December)
Pages: 236-244

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Handle: RePEc:asi:aeafrj:2011:p:236-244

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Related research

Keywords: Fiscal policy; monetary policy; government spending; economic growth;

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  1. repec:ebl:ecbull:v:8:y:2006:i:11:p:1-11 is not listed on IDEAS
  2. Jürgen von Hagen & Susanne Mundschenk, 2003. "Fiscal and monetary policy coordination in EMU," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 8(4), pages 279-295.
  3. van Aarle, Bas & Garretsen, Harry & Gobbin, Niko, 2003. "Monetary and fiscal policy transmission in the Euro-area: evidence from a structural VAR analysis," Journal of Economics and Business, Elsevier, vol. 55(5-6), pages 609-638.
  4. V. Anton Muscatelli & Patrizio Tirelli, 2004. "Analyzing the Interaction of Monetary and Fiscal Policy: Does Fiscal Policy Play a Valuable Role in Stabilisation?," Working Papers 2005_17, Business School - Economics, University of Glasgow, revised Jun 2005.
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