The Relative Effectiveness of Monetary and Fiscal Policies in Economic Growth: A Case Study of Pakistan

In this study the role of monetary and fiscal policies in economic growth of Pakistan is studied using time series data for the period 1973-2008. The objective of this study is to discover the ways by which fiscal and monetary policies can be established to boost economic growth, highlight present Pakistan fiscal and monetary challenges to discover regions which may yield upgrading to the fiscal and monetary framework and consequently increase employment opportunities and the budget revenues in Pakistan. The augmented Dickey Fuller unit root procedure is used to check the time series properties. The Autoregressive Distributed Lag Model technique is used to find the long-run relationship between fiscal /monetary policy and economic growth. The results show that monetary and fiscal policies both play a significant role in the economic growth of Pakistan. The relationship between GDP and Government Current Expenditure (GCE) is found to be negative while, Currency in Circulation (CIR) and Government Development Expenditure (GDE) affect GDP positively in case of Pakistan.