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Impact of Fiscal Policy on the Economy of Pakistan

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  • Subhani, Muhammad Imtiaz

Abstract

This research paper endeavors the relationship and the positive effect between tax rates, inflation rate and the balance of trade in Pakistan by utilizing the economic survey and current scenario of increasing tax rate because of increasing inflation rates and decreasing of balance of trade to represent the economic position of Pakistan. The data by the researcher was all on yearly basis for the above variables and the tax rate was being recorded by the direct and indirect from the period of 1979 to 2009. The research implement regression model to test the effect of tax rates progression on inflation rate rates and another 2-stage least square test of tax rate on balance of trade so in this result, shows that there was a significant impact in these variables. The study concluded on this way that there was no significant association between tax rates on inflation rate in Pakistan. There was the impact of tax rate on balance of trade.

Suggested Citation

  • Subhani, Muhammad Imtiaz, 2010. "Impact of Fiscal Policy on the Economy of Pakistan," MPRA Paper 36172, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:36172
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    File URL: https://mpra.ub.uni-muenchen.de/36172/1/MPRA_paper_36172.pdf
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    References listed on IDEAS

    as
    1. Gali­, Jordi & Monacelli, Tommaso, 2008. "Optimal monetary and fiscal policy in a currency union," Journal of International Economics, Elsevier, vol. 76(1), pages 116-132, September.
    2. Lavoie, Marc, 1996. "Horizontalism, Structuralism, Liquidity Preference and the Principle of Increasing Risk," Scottish Journal of Political Economy, Scottish Economic Society, vol. 43(3), pages 275-300, August.
    3. António AFONSO & Ricardo SOUSA, "undated". "Fiscal Policy, Housing and Stock Prices," EcoMod2010 259600005, EcoMod.
    4. Olivier Blanchard & Roberto Perotti, 2002. "An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output," The Quarterly Journal of Economics, Oxford University Press, vol. 117(4), pages 1329-1368.
    5. Leonardo Leiderman & Mario I. Blejer, 1988. "Modeling and Testing Ricardian Equivalence: A Survey," IMF Staff Papers, Palgrave Macmillan, vol. 35(1), pages 1-35, March.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Fiscal Policy; Economy of Pakistan;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy

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