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Fiscal Deficit and Private Sector Activities in Pakistan


Author Info

  • Khan, Ashfaque H.

    (Pakistan Institute of Development Economics (PIDE) Quaid-i-Azam University Campus)

  • Iqbal, Zafar

    (Department of Management Sciences, National University of Computer and Emerging Sciences, Lahore Campus Block-B)

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    The macroeconomic effects of fiscal deficit have been examined in the light of three theories.viz: conventional crowding out, Keynesian crowding out and the monetary approach to the balance of payments. Using data for the period 1959.60 to 1986.87 this paper finds the absence of conventional ns well as Keynesian crowding out effects in Pakistan. Nevertheless, this paper finds that increase in fiscal deficit worsens current account balance. - a finding, in line with the monetary approach to the balance of payments. This paper also shows that increase in fiscal deficit reduces private savings, hence investment and growth in Pakistan.

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    Bibliographic Info

    Article provided by Camera di Commercio di Genova in its journal Economia Internazionale / International Economics.

    Volume (Year): 44 (1991)
    Issue (Month): 2-3 ()
    Pages: 182-190

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    Handle: RePEc:ris:ecoint:0475

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    Cited by:
    1. Looney, Robert E., 1997. "Excessive defense expenditures and economic stabilization: The case of Pakistan," Journal of Policy Modeling, Elsevier, vol. 19(4), pages 381-406, August.
    2. Kalim Hyder, 2001. "Crowding-out Hypothesis in a Vector Error Correction Framework: A Case Study of Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 40(4), pages 633-650.
    3. Zafar Iqbal & Ghulam Mustafa Zahid, 1998. "Macroeconomic Determinants of Economic Growth in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 37(2), pages 125-148.
    4. Hyder, Kalim & Ahmed, Qazi Masood, 2003. "Why Private Investment In Pakistan Has Collapsed And How It Can Be Restored," MPRA Paper 16251, University Library of Munich, Germany, revised 01 Jan 2004.


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