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Fiscal Deficit and Private Sector Activities in Pakistan

Author

Listed:
  • Khan, Ashfaque H.

    (Pakistan Institute of Development Economics (PIDE) Quaid-i-Azam University Campus)

  • Iqbal, Zafar

    (Department of Management Sciences, National University of Computer and Emerging Sciences, Lahore Campus Block-B)

Abstract

The macroeconomic effects of fiscal deficit have been examined in the light of three theories.viz: conventional crowding out, Keynesian crowding out and the monetary approach to the balance of payments. Using data for the period 1959.60 to 1986.87 this paper finds the absence of conventional ns well as Keynesian crowding out effects in Pakistan. Nevertheless, this paper finds that increase in fiscal deficit worsens current account balance. - a finding, in line with the monetary approach to the balance of payments. This paper also shows that increase in fiscal deficit reduces private savings, hence investment and growth in Pakistan.

Suggested Citation

  • Khan, Ashfaque H. & Iqbal, Zafar, 1991. "Fiscal Deficit and Private Sector Activities in Pakistan," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 44(2-3), pages 182-190.
    • Handle: RePEc:ris:ecoint:0475
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    Citations

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    Cited by:

    1. Mohey-ud-din, Ghulam & Siddiqi, Muhammad Wasif, 2013. "GDP Fluctuations and Private Investment: A Macro Panel Analysis of Selected South Asian Countries," MPRA Paper 60231, University Library of Munich, Germany, revised 15 Jun 2014.
    2. Chakraborty, Lekha S., 2006. "Fiscal deficit, capital formation, and crowding out: Evidence from India," Working Papers 06/43, National Institute of Public Finance and Policy.
    3. Kalim Hyder & Qazi Masood Ahmed, 2004. "Why Private Investment In Pakistan Has Collapsed And How It Can Be Restored," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 9(1), pages 107-125, Jan-June.
    4. Zafar Iqbal & Ghulam Mustafa Zahid, 1998. "Macroeconomic Determinants of Economic Growth in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 37(2), pages 125-148.
    5. Kalim Hyder, 2001. "Crowding-out Hypothesis in a Vector Error Correction Framework: A Case Study of Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 40(4), pages 633-650.
    6. Afia Malik, 2013. "Private Investment And Fiscal Policy In Pakistan," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 38(1), pages 83-109, March.
    7. Gulzar Ali & Sara Rafiq, 2015. "Motivating Factors of Private Investment in Agriculture Sector of Pakistan," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 5(11), pages 46-58, November.
    8. Looney, Robert E., 1997. "Excessive defense expenditures and economic stabilization: The case of Pakistan," Journal of Policy Modeling, Elsevier, vol. 19(4), pages 381-406, August.

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