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The wrong impact of Fiscal Imbalance on economic growth and Monetary Policy consequences (A case of Pakistan)

Author

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  • Ahmed, Ovais
  • Mashkoor, Aasim

Abstract

This study is to investigate the wrong impact of fiscal imbalance on economic growth of country through contiguous monetary policy made by central bank of Pakistan. The purpose of the empirical study is to determine the solution of monetary policy which emulated fiscal deficit that cause to imbalance in money supply and diverges interest rate on bank borrowings. To keeping view of literatures, reveals the monetary policy and fiscal imbalance relationship which creates the view of fiscal challenges in economy. Data has been collected from prior research studies and literatures. In this study correlation and regression analysis are being used to measure the relationship between monetary and fiscal variables. For this analysis, these statistical measurements evaluated the fiscal imbalance and monetary policy. Besides, the ANOVA and Multicollinearity also were used. The research study is limited to economic statistics from 1980 to 2013 that possibly collected from Pakistan bureau of statistics. The conclusive point of this study that fiscal imbalance could be improvised by adopting monetary policy appropriately implemented in economy that could make sustainable growth in country. By this change, inflation indicates integral part of fiscal deficit and monetary stances. For this study, Correlation and regression analysis showed that predictive approaches of fiscal imbalance with inflation and monetary policy which is not adequately adjusted with economic growth.

Suggested Citation

  • Ahmed, Ovais & Mashkoor, Aasim, 2016. "The wrong impact of Fiscal Imbalance on economic growth and Monetary Policy consequences (A case of Pakistan)," MPRA Paper 69752, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:69752
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    References listed on IDEAS

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    3. James Heintz & Gerald Epstein, 2006. "Monetary Policy and Financial Sector Reform For Employment Creation and Poverty Reduction in Ghana," Working Papers wp113, Political Economy Research Institute, University of Massachusetts at Amherst.
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    6. Shang-Jin Wei & Ms. Irina Tytell, 2004. "Does Financial Globalization Induce Better Macroeconomic Policies?," IMF Working Papers 2004/084, International Monetary Fund.
    7. Ahmed, Ovais & Mashkoor, Aasim, 2015. "Assets of Nation (Pyramid of Economic Development)," MPRA Paper 67564, University Library of Munich, Germany.
    8. Gerald Epstein & James Heintz, 2006. "Monetary Policy and Financial Sector Reform for Employment Creation and Poverty Reduction in Ghana," Research Report 2, International Policy Centre for Inclusive Growth.
    9. Jonathan Millar, 1997. "The Effects of Budget Rules on Fiscal Performance and Macroeconomic Stabilization," Staff Working Papers 97-15, Bank of Canada.
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    Cited by:

    1. Tariq Hussain & Ahmad Raza Ul Mustafa & Makhdum M.I. & Kaleem Ullah, 2022. "Defense Expenditures, Fiscal Deficit And Debt Servicing Nexus: A Case Study Of Pakistan," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 11(2), pages 74-83, June.

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    More about this item

    Keywords

    Fiscal Imbalance; Monetary Policy; Inflation;
    All these keywords.

    JEL classification:

    • G0 - Financial Economics - - General
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O2 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development

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