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Macroeconomic Factors Affecting Budget Deficit in Pakistan: A Time Series Analysis


  • Ayesha Mushtaq

    (COMSATS Institute of Information Technology, Abbottabad, Pakistan)

  • Khalid Zaman

    (COMSATS Institute of Information Technology, Abbottabad, Pakistan)


The objective of the study is to empirically investigate the relationship between budget deficit and macroeconomic factors i.e., financial development indicator, economic growth, changes in price level and real exchange rate, by using data from1980-2011 for Pakistan. The results reveal that there is a positive and significant relationship between real effective exchange rate and budget deficit on one hand, while economic growth and financial development indicator with reference to budget deficit on the other hand. Changes in price level have a significant and negative relationship with the budget deficit in Pakistan.

Suggested Citation

  • Ayesha Mushtaq & Khalid Zaman, 2013. "Macroeconomic Factors Affecting Budget Deficit in Pakistan: A Time Series Analysis," Oeconomics of Knowledge, Saphira Publishing House, vol. 5(4), pages 17-33, October.
  • Handle: RePEc:eok:journl:v:5:y:2013:i:4:p:17-33

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    References listed on IDEAS

    1. Lin, Hsin-Yi & Chu, Hao-Pang, 2013. "Are fiscal deficits inflationary?," Journal of International Money and Finance, Elsevier, vol. 32(C), pages 214-233.
    2. Jamaleddin Mohseni Zonuzi & Mahnaz S.Hashemi Pourvaladi & Nasrin Faraji, 2011. "The Relationship between Budget Deficit and Inflation in Iran," Iranian Economic Review, Economics faculty of Tehran university, vol. 16(1), pages 117-133, winter.
    3. Ari Aisen & David Hauner, 2013. "Budget deficits and interest rates: a fresh perspective," Applied Economics, Taylor & Francis Journals, vol. 45(17), pages 2501-2510, June.
    4. Tanzi, Vito, 1982. "Fiscal disequilibrium in developing countries," World Development, Elsevier, vol. 10(12), pages 1069-1082, December.
    5. Kahnim Farajova, 2011. "Budget Deficit and Macroeconomics Fundamentals: The case of Azerbaijan," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Eastern Macedonia and Thrace Institute of Technology (EMATTECH), Kavala, Greece, vol. 4(2), pages 143-158, August.
    6. M. Aslam Chaudhary & Ghulam Shabbir, 2004. "Macroeconomic Impacts of Monetary Variables on Pakistan’s Foreign Sector," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 9(1), pages 62-84, Jan-June.
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    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • H68 - Public Economics - - National Budget, Deficit, and Debt - - - Forecasts of Budgets, Deficits, and Debt
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence


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