Abstract
The objective of this paper is to assess the neutrality and non-neutrality of fiscal policy in
Pakistan. We use Dynamic Stochastic General Equilibrium (DSGE) model for Pakistan
economy. We examine the impact of fiscal policy, particularly government spending, taxes
and borrowing on output growth, inflation and interest rate. Findings of this research
paper show the non-neutrality of fiscal policy with respect to inflation, interest rate and
economic growth. We find supportive evidences for the existence of fiscal theory of price
level indicating the significant impact of fiscal policy on price level. Interest rate also
positively responds to fiscal policy. Findings further revealed that economic growth is
negatively affected by increase in government spending and tax rate. The findings of this
study provide empirical supports for cohesive and increased coordination between fiscal
and monetary policy.
Muhammad Shahid, Mukhtar Ahmad, Atta Ur Rahman. (2018) Assessing the Neutrality and Non-Neutrality of Fiscal Policy in Pakistan, The Journal of Humanities & Social Sciences, Volume-26, Issue-1.
-
Views
1041 -
Downloads
94
Next Article
Article Details
Volume
Issue
Type
Language
