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Political determinants of budget deficit in Pakistan: An empirical investigation

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  • Anwar, Mumtaz
  • Ahmad, Munazza

Abstract

This study is an attempt to check some political factors determining budget deficit in Pakistan. It examines the short and long-run relationship between the Budget deficit, democracy and cabinet size for Pakistan's economy. The bounds testing approach to co-integration and (ECM) error-correction models, developed within an autoregressive distributed lag (ARDL) framework is applied to annual data for the period 1976 to 2009 in order to investigate whether a long-run equilibrium relationship exists between the budget deficit and these factors. The result of the bounds test indicates that there exist long-run relationship between the budget deficit and political variables. The results provide strong evidence that large government size will significantly add to the budget deficit. The democracy can help in reducing budget deficit but shows a weaker influence in case of Pakistan for the sample period.

Suggested Citation

  • Anwar, Mumtaz & Ahmad, Munazza, 2012. "Political determinants of budget deficit in Pakistan: An empirical investigation," HWWI Research Papers 135, Hamburg Institute of International Economics (HWWI).
    • Handle: RePEc:zbw:hwwirp:135
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    References listed on IDEAS

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    Cited by:

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    2. Asif Razzaq & Rabia Nazir & Fareeha Adil, 2020. "Dynamic Relationship among Tax Evasion, Control over Corruption and Political Accountability: A Case Study of Pakistan," International Journal of Economics and Financial Issues, Econjournals, vol. 10(5), pages 256-261.
    3. Vöpel, Henning, 2013. "A Zidane clustering theorem: Why top players tend to play in one team and how the competitive balance can be restored," HWWI Research Papers 141, Hamburg Institute of International Economics (HWWI).
    4. Bräuninger, Michael, 2014. "Tax sovereignty and feasibility of international regulations for tobacco tax policies," HWWI Research Papers 152, Hamburg Institute of International Economics (HWWI).
    5. Rozina Shaheen, 2018. "Testing Fiscal Dominance Hypothesis in a Structural VAR Specification for Pakistan," Scientific Annals of Economics and Business (continues Analele Stiintifice), Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 65(1), pages 51-63, March.

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    More about this item

    Keywords

    Budget Deficit; Democracy; ARDL; Pakistan;
    All these keywords.

    JEL classification:

    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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