IDEAS home Printed from https://ideas.repec.org/a/bmo/bmoart/v4y2017i1p17-32.html
   My bibliography  Save this article

The Fiscal Impacts of Privatization Reforms in Pakistan: A Dynamic Analysis

Author

Listed:
  • Abdul Aleem Qureshi

    ((Corresponding Author) Applied Economics Research Center. E-mail: aleem96@hotmail.com.)

  • Syed Faizan Iftikhar

    (Applied Economics Research Center.)

  • Mohsin Hasnain Ahmed

    (Applied Economics Research Center.)

Abstract

There are various reasons of privatization attraction for the regime of the developing nations. These revenues from the sale of state owned enterprises can demonstrate a possible resolution to persistent deficits. The study initiates a fresh avenue of research by evaluating the fiscal impact of privatization receipt. The factors that leads to persistent fiscal budget deficits and explain how empirical research on the fiscal impact of privatization would be a legitimate extension of this inquiry. For the long run and short run analysis Co-integration and VECM techniques are used. In present study it is found that there exist short run and long run relation among the macroeconomic variables, but the result of short run suggest that though there exists a short run relation the effects are not positive. Moreover, in the long run privatization caters only a minimal proportion of government expenditure. While Gross Domestic Product, Gross Fixed Capital Formation, GDP per Capita, Real Effective Exchange Rate, Unemployment have a positive and significant impact on government in the long run. Macroeconomic instability shows a negative impact in the long run. In short run the Gross Domestic Product, Gross Fixed Capital Formation and Real Effective Exchange Rate have significant positive impact while macroeconomic instability, GDP per Capita and Unemployment have no immediate impact in the short run. The study also confirms that there exist a causal relationship between Privatization and Government Expenditure

Suggested Citation

  • Abdul Aleem Qureshi & Syed Faizan Iftikhar & Mohsin Hasnain Ahmed, 2017. "The Fiscal Impacts of Privatization Reforms in Pakistan: A Dynamic Analysis," Econometrics Letters, Bilimsel Mektuplar Organizasyonu (Scientific letters), vol. 4(1), pages 17-32.
    • Handle: RePEc:bmo:bmoart:v:4:y:2017:i:1:p:17-32
    as

    Download full text from publisher

    File URL: http://econometricsletters.com/wp-content/uploads/2017/10/Qureshi-Iftikhar-Ahmed-EcoLet-format.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Ravallion, Martin & Chen, Shaohua, 1997. "What Can New Survey Data Tell Us about Recent Changes in Distribution and Poverty?," The World Bank Economic Review, World Bank, vol. 11(2), pages 357-382, May.
    2. Paul Cook & Yuichiro Uchida, 2003. "Privatisation and economic growth in developing countries," Journal of Development Studies, Taylor & Francis Journals, vol. 39(6), pages 121-154.
    3. Mubariz Hasanov, 2014. "Testing for a unit root in the presence of a nonlinear trend: The case of Australian Reel Exchange Rate," Econometrics Letters, Bilimsel Mektuplar Organizasyonu (Scientific letters), vol. 1(1), pages 10-17.
    4. Luigi Paganetto & Edmund S. Phelps (ed.), 2003. "Finance, Research, Education and Growth," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-4039-2023-2, October.
    5. Haque, Nadeem U. & Montiel, Peter, 1991. "The macroeconomics of public sector deficits : the case of Pakistan," Policy Research Working Paper Series 673, The World Bank.
    6. Schmidt, Klaus M. & Schnitzer, Monika, . "Methods of privatization: Auctions, bargaining, and giveaways," Chapters in Economics,, University of Munich, Department of Economics.
    7. Goel, Rajeev K. & Budak, Jelena, 2006. "Privatization in transition economies: Privatization scale and country size," Economic Systems, Elsevier, vol. 30(1), pages 98-110, March.
    8. John Bennett & Saul Estrin & Giovanni Urga, 2007. "Methods of privatization and economic growth in transition economies1," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 15(4), pages 661-683, October.
    9. Fumitoshi Mizutani & Shuji Uranishi, 2010. "Determinants of privatization of public corporations: evidence from the Japanese experience," Empirical Economics, Springer, vol. 39(2), pages 515-535, October.
    10. Lesley Davies & Kathryn Wright & Catherine Waddams Price, 2005. "Experience of Privatisation, Regulation and Competition: Lessons for Governments," Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) 2005-05, Centre for Competition Policy, University of East Anglia, Norwich, UK..
    11. Clarke, George R G & Cull, Robert, 2002. "Political and Economic Determinants of the Likelihood of Privatizing Argentine Public Banks," Journal of Law and Economics, University of Chicago Press, vol. 45(1), pages 165-197, April.
    12. Saul Estrin & Jan Hanousek & Evzen Kocenda & Jan Svejnar, 2009. "The Effects of Privatization and Ownership in Transition Economies," Journal of Economic Literature, American Economic Association, vol. 47(3), pages 699-728, September.
    13. Boubakri, Narjess & Cosset, Jean-Claude & Guedhami, Omrane, 2004. "Privatization, corporate governance and economic environment: Firm-level evidence from Asia," Pacific-Basin Finance Journal, Elsevier, vol. 12(1), pages 65-90, January.
    14. David Parker & Colin Kirkpatrick, 2005. "Privatisation in Developing Countries: A Review of the Evidence and the Policy Lessons," Journal of Development Studies, Taylor & Francis Journals, vol. 41(4), pages 513-541.
    15. David Dollar & Aart Kraay, 2004. "Trade, Growth, and Poverty," Economic Journal, Royal Economic Society, vol. 114(493), pages 22-49, February.
    16. Samuel Adams & Berhanu Mengistu, 2008. "Privatization, Governance and Economic Development in Developing Countries," Journal of Developing Societies, , vol. 24(4), pages 415-438, October.
    17. Tolga Omay & Dilem Yildirim, 2014. "Nonlinearity and Smooth Breaks in Unit Root Testing," Econometrics Letters, Bilimsel Mektuplar Organizasyonu (Scientific letters), vol. 1(1), pages 1-9.
    18. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
    19. Li, Hongbin, 2003. "Government's budget constraint, competition, and privatization: evidence from China's rural industry," Journal of Comparative Economics, Elsevier, vol. 31(3), pages 486-502, September.
    20. Ravi Ramamurti, 1992. "Why are Developing Countries Privatizing?," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 23(2), pages 225-249, June.
    21. Omay, Tolga, 2015. "Fractional Frequency Flexible Fourier Form to approximate smooth breaks in unit root testing," Economics Letters, Elsevier, vol. 134(C), pages 123-126.
    22. Iram A. Khan, 2003. "Impact of Privatisation on Employment and Output in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 42(4), pages 513-536.
    23. Martin Zagler & Georg Dürnecker, 2003. "Fiscal Policy and Economic Growth," Journal of Economic Surveys, Wiley Blackwell, vol. 17(3), pages 397-418, July.
    24. Albert Chong & Florencio López-de-Silanes, 2004. "Privatization in Latin America: What Does the Evidence Say?," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Spring 20), pages 37-111, January.
    25. Darius Palia & Edmund S. Phelps, 2003. "The Empirical Importance of Private Ownership for Economic Growth," Palgrave Macmillan Books, in: Luigi Paganetto & Edmund S. Phelps (ed.), Finance, Research, Education and Growth, chapter 2, pages 25-37, Palgrave Macmillan.
    26. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    27. Pinheiro, Armando Castelear & Schneider, Ben Ross, 1994. "The fiscal impact of privatization in Latin America," The Quarterly Review of Economics and Finance, Elsevier, vol. 34(Supplemen), pages 9-42.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Maryam Almasifard & Sasan Torabzadeh Khorasani, 2017. "Relationship Between Domestic Production in Agricultural and Industrial Sectors and Purchasing Power by Controlling for International Trade Variables (Iran)," International Journal of Economics and Financial Issues, Econjournals, vol. 7(4), pages 244-253.
    2. Rahman, Mohammad Mafizur & Mamun, Shamsul Arifeen Khan, 2016. "Energy use, international trade and economic growth nexus in Australia: New evidence from an extended growth model," Renewable and Sustainable Energy Reviews, Elsevier, vol. 64(C), pages 806-816.
    3. Herzer, Dierk, 2013. "Cross-Country Heterogeneity and the Trade-Income Relationship," World Development, Elsevier, vol. 44(C), pages 194-211.
    4. Liu, Yi & Li, Xue & Lahiri, Sajal, 2016. "Determinants of privatization in China: The role of the presence of foreign firms," China Economic Review, Elsevier, vol. 41(C), pages 196-221.
    5. Parker, David & Kirkpatrick, Colin & Figueira-Theodorakopoulou, Catarina, 2008. "Infrastructure regulation and poverty reduction in developing countries: A review of the evidence and a research agenda," The Quarterly Review of Economics and Finance, Elsevier, vol. 48(2), pages 177-188, May.
    6. Khan, Rana Ejaz Ali & Sattar, Rashid, 2010. "Trade, Growth and Povety: A Case of Pakistan," MPRA Paper 20904, University Library of Munich, Germany.
    7. Andrzej Cieślik & Łukasz Goczek, 2018. "Corruption, Privatisation and Economic Growth in Post-communist Countries," Europe-Asia Studies, Taylor & Francis Journals, vol. 70(8), pages 1303-1325, September.
    8. Sudeshna Ghosh, 2019. "Environmental Pollution, Income Inequality, and Household Energy Consumption: Evidence from the United Kingdom," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 10(02), pages 1-31, June.
    9. Rutayisire, J.Musoni, 2021. "Public debt dynamics and nonlinear effects on economic growth : evidence from Rwanda," MPRA Paper 110931, University Library of Munich, Germany.
    10. Ademola Obafemi YOUNG, 2019. "Why Has Growth Not Trickled Down to the Poor? A Study of Nigeria," Review of European Studies, Canadian Center of Science and Education, vol. 11(1), pages 156-156, December.
    11. Byoungki Kim & Phouphet Kyophilavong & Kenji Nozaki & Teerawat Charoenrat, 2022. "Does the Export-led Growth Hypothesis Hold for Myanmar?," Global Business Review, International Management Institute, vol. 23(1), pages 48-60, February.
    12. Santos, João & Domingos, Tiago & Sousa, Tânia & St. Aubyn, Miguel, 2016. "Does a small cost share reflect a negligible role for energy in economic production? Testing for aggregate production functions including capital, labor, and useful exergy through a cointegration-base," MPRA Paper 70850, University Library of Munich, Germany.
    13. Law, Siong Hook & Tan, Hui & baharumshah, ahmad, 1999. "Financial Liberalization in ASEAN and the Fisher Hypothesis," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 33, pages 65-86.
    14. Vassilis Monastiriotis & Cigdem Borke Tunali, 2020. "The Sustainability of External Imbalances in the European Periphery," Open Economies Review, Springer, vol. 31(2), pages 273-294, April.
    15. Zamani, Mehrzad, 2007. "Energy consumption and economic activities in Iran," Energy Economics, Elsevier, vol. 29(6), pages 1135-1140, November.
    16. Muhammad Shafiullah & Ravinthirakumaran Navaratnam, 2016. "Do Bangladesh and Sri Lanka Enjoy Export-Led Growth? A Comparison of Two Small South Asian Economies," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 17(1), pages 114-132, March.
    17. Xu, Haifeng & Hamori, Shigeyuki, 2012. "Dynamic linkages of stock prices between the BRICs and the United States: Effects of the 2008–09 financial crisis," Journal of Asian Economics, Elsevier, vol. 23(4), pages 344-352.
    18. Baillie, Richard T & Bollerslev, Tim, 1994. "Cointegration, Fractional Cointegration, and Exchange Rate Dynamics," Journal of Finance, American Finance Association, vol. 49(2), pages 737-745, June.
    19. repec:ebl:ecbull:v:6:y:2004:i:4:p:1-8 is not listed on IDEAS
    20. Titus O. Awokuse, 2003. "Is the export-led growth hypothesis valid for Canada?," Canadian Journal of Economics, Canadian Economics Association, vol. 36(1), pages 126-136, February.
    21. Zheng, Li & Abbasi, Kashif Raza & Salem, Sultan & Irfan, Muhammad & Alvarado, Rafael & Lv, Kangjuan, 2022. "How technological innovation and institutional quality affect sectoral energy consumption in Pakistan? Fresh policy insights from novel econometric approach," Technological Forecasting and Social Change, Elsevier, vol. 183(C).

    More about this item

    Keywords

    Privatization; Fiscal Impact; VECM; Cointegration.;
    All these keywords.

    JEL classification:

    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bmo:bmoart:v:4:y:2017:i:1:p:17-32. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tolga Omay (email available below). General contact details of provider: http://www.econometricsletters.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.