The Role of Budget Deficit in the Economic Growth of Pakistan

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Najid Ahmad
Najid Ahmad M.Sc Economics
1 Bahauddin Zakaryia University

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The basic aim of this paper is to investigate the relation between Budget Deficit and Gross Domestic Product of Pakistan. There are three views about this relation. Keynesian says that there is a positive relation between budget deficit and economic growth while neo-classical views that there is an inverse relation between budget deficit and economic growth. Recardian says that there is neutral relation between budget deficit and economic growth. A time series data for the period of 1971-2007 has been used to check the relation between budget deficit and economic growth of Pakistan. GDP is taken as dependent variable, FDI and budget deficit as independent variables. ADF test has been used to check the stationary of the data. All variables get stationary at 5% level of significance at level. The results of Granger causality test show that there is bi-directional causality running from budget deficit to GDP and GDP to budget deficit.

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No external funding was declared for this work.

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The authors declare no conflict of interest.

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Najid Ahmad. 2013. \u201cThe Role of Budget Deficit in the Economic Growth of Pakistan\u201d. Global Journal of Management and Business Research - B: Economic & Commerce GJMBR-B Volume 13 (GJMBR Volume 13 Issue B5): .

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Crossref Journal DOI 10.17406/GJMBR

Print ISSN 0975-5853

e-ISSN 2249-4588

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July 31, 2013

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English

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The basic aim of this paper is to investigate the relation between Budget Deficit and Gross Domestic Product of Pakistan. There are three views about this relation. Keynesian says that there is a positive relation between budget deficit and economic growth while neo-classical views that there is an inverse relation between budget deficit and economic growth. Recardian says that there is neutral relation between budget deficit and economic growth. A time series data for the period of 1971-2007 has been used to check the relation between budget deficit and economic growth of Pakistan. GDP is taken as dependent variable, FDI and budget deficit as independent variables. ADF test has been used to check the stationary of the data. All variables get stationary at 5% level of significance at level. The results of Granger causality test show that there is bi-directional causality running from budget deficit to GDP and GDP to budget deficit.

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The Role of Budget Deficit in the Economic Growth of Pakistan

Najid Ahmad
Najid Ahmad Bahauddin Zakaryia University

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