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Exchange Rate, Interest Rate and Ricardian Equivalence Evidence from Pakistan

Author

Listed:
  • Muhammad Waqas

    (Department of Economics, University of Sargodha, Pakistan)

  • Masood Sarwar Awan

    (Department of Economics, University of Sargodha, Pakistan)

Abstract

The aim of this study is to investigate the validity of Ricardian Equivalence Hypothesis in Pakistan by using annual data from 1973-2010. In our previous studies we investigated the Ricardian Equivalence Hypothesis and its sources of deviation in Pakistan by using Structural Consumption function and Euler Equation approach. The present study investigated this hypothesis in terms of rate of interest and exchange rate. Results of Auto Regressive Distributed Lag cointegration investigate the long run relationship among variables. By using OLS technique this study rejected Ricardian Equivalence Hypothesis in case of Pakistan. The findings of the study demonstrate the focus towards the significance of fiscal policies in raising private consumption and controlling budget deficits.

Suggested Citation

  • Muhammad Waqas & Masood Sarwar Awan, 2012. "Exchange Rate, Interest Rate and Ricardian Equivalence Evidence from Pakistan," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 0(SS), pages 249-269.
    • Handle: RePEc:rej:journl:v:15:y:2012:i:46:p:249-269
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    References listed on IDEAS

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    Cited by:

    1. Zia-Ur- Rahman, 2019. "Influence of Excessive Expenditure of the Government in Perspective of Interest Rate and Money Circulation Which in Turn Affects the Growing Process in Pakistan," Asian Journal of Economics and Empirical Research, Asian Online Journal Publishing Group, vol. 6(2), pages 120-129.

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    More about this item

    Keywords

    Ricardian Equivalence Hypothesis; Exchange Rate; Pakistan;
    All these keywords.

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

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