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Financing the Fiscal Deficit in Pakistan: Evidence on Ricardian Equivalence

Author

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  • Shamsi, Neelma

    (The University of Lahore, Sargodha Campus, Pakistan)

  • Waqas, Muhammad

    (UMR-SADAPT Agroparistech, France)

Abstract

This study investigated the validity of Ricardian equivalence hypothesis in case of Pakistan. Annual time series data from 1978 to 2013 has been used for analysis. Two models have been estimated; structural consumption function and structural saving function. The results of unit root tests explored that all the variables have different order of integration. The results of ARDL co-integration approach verified the existence of a long run relationship among variables for both models. By using OLS, wald test rejects the restrictions on both models and concludes that Pakistan is a non-ricardian economy.

Suggested Citation

  • Shamsi, Neelma & Waqas, Muhammad, 2016. "Financing the Fiscal Deficit in Pakistan: Evidence on Ricardian Equivalence," Sukkur IBA Journal of Management and Business, Sukkur IBA University, vol. 3(2), pages 39-49, July - De.
    • Handle: RePEc:ris:ibajmb:0025
    DOI: 10.30537/sijmb.v3i2.97
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    More about this item

    Keywords

    Ricardian Equivalence Theory; Budget Deficit; Pakistan;
    All these keywords.

    JEL classification:

    • H68 - Public Economics - - National Budget, Deficit, and Debt - - - Forecasts of Budgets, Deficits, and Debt

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