Fiscal and Monetary Policy Dilemma in Pakistan to Support Economic Growth

Authors

  • Mariam Abbas Soharwardi Department of Economics, The Islamia University of Bahawalpur, Pakistan
  • Javeria Sarwar Department of Economics, Lahore College for Women University, Pakistan
  • Muhammad Imran Khan Department of Mathematics and Statistics, University of Agriculture Faisalabad, Pakistan
  • Mariam Miraj Department of Economics, The Islamia University of Bahawalpur, Pakistan

DOI:

https://doi.org/10.52223/jei4032210

Keywords:

Monetary policy, Fiscal policy, Economic growth

Abstract

Monetary and fiscal policy are both macroeconomic instruments used to govern and have a large impact on a country's economy, businesses, production and consumption. The objective of the study is to evaluate the comparative analysis of fiscal and monetary policy in Pakistan. For this purpose, an autoregressive distributed lag (ARDL) model was used, which showed the significant impact of monetary and fiscal policy on enhancing economic growth. Data was obtained from World Development Indicator (WDI) from 1990 to 2020. In this study, two models have been estimated using the Gross Domestic Product (GDP) as a dependent variable and Development Expenditures, Gross Fixed Capital Formation, Labor Force Participation, Corruption, Total Tax, Trade openness, Broad Money (M2), Governmental Consumption Expenditure as independent variables. The results showed that monetary policy positively impacts Pakistan’s economy. Also, the study found that fiscal policy affects Pakistan’s economy positively. But the study reveals that monetary policy is more powerful in promoting economic growth in Pakistan. So, we will suggest that promoting the monetary policy in the banking sector would provide a suitable investment atmosphere through the maintenance of inflationary rates, interest rates, and lending rates to endorse and confirm economic growth, sustainability, solidity, and progress in Pakistan.

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Published

2022-12-30

How to Cite

Soharwardi, M. A., Sarwar, J., Khan, M. I. and Miraj, M. (2022) “Fiscal and Monetary Policy Dilemma in Pakistan to Support Economic Growth”, Journal of Economic Impact, 4(3), pp. 233–243. doi: 10.52223/jei4032210.

Issue

Section

Research Articles
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