Abstract/Description

This paper delves into the intricate dynamics of fiscal policy, particularly in the context of developing economies, exemplified by Pakistan. While fiscal stimuli are commonly deployed to counter economic crises and foster growth, their implementation often results in increased public debt, inflation, and a host of macroeconomic challenges. Our study examines Pakistan as a case study, analyzes a) if the fiscal policy is procyclical, acyclical or counter cycle, b) how shocks in GDP and fiscal policy are received by key macroeconomic indicators including public debt, CPI, exchange rate, and money market rate etc. and c) what are the political economic and institutional determinants of the behavior of fiscal policy identified in (a). Using quarterly data from 2003Q3 to 2023Q2, we have worked on (a) and (b) while our work on (c) is in progress and we aim to complete it by the end of September, well before the conference.

Keywords

Fiscal Policy, Public Debt, Economic Growth, Cyclicality

Location

S1 room, Adamjee building

Session Theme

Evolving Dynamics in Inflation, Monetary and Fiscal Policy

Session Type

Parallel Technical Session

Session Chair

Kalim Hyder, State Bank of Pakistan

Session Discussant

Ilfan Oh, Institute of Business Administration ; Karim Khan, Pakistan Institute of Development Economics

Start Date

10-12-2024 3:15 PM

End Date

10-12-2024 5:15 PM

Click the Download button to view presentation slides.

Share

COinS
 
Dec 10th, 3:15 PM Dec 10th, 5:15 PM

From Boom to Bust: The Perils of Pro-Cyclicality in Fiscal Policy

S1 room, Adamjee building

This paper delves into the intricate dynamics of fiscal policy, particularly in the context of developing economies, exemplified by Pakistan. While fiscal stimuli are commonly deployed to counter economic crises and foster growth, their implementation often results in increased public debt, inflation, and a host of macroeconomic challenges. Our study examines Pakistan as a case study, analyzes a) if the fiscal policy is procyclical, acyclical or counter cycle, b) how shocks in GDP and fiscal policy are received by key macroeconomic indicators including public debt, CPI, exchange rate, and money market rate etc. and c) what are the political economic and institutional determinants of the behavior of fiscal policy identified in (a). Using quarterly data from 2003Q3 to 2023Q2, we have worked on (a) and (b) while our work on (c) is in progress and we aim to complete it by the end of September, well before the conference.