Theses and Dissertations

Student Number

05650

Degree

Master of Science in Economics

Department

Department of Economics

Date of Award

Fall 2016

Advisor

Dr. Adnan Haider

Committee Member 1

Dr. Adnan Haider, Institute of Business Administration, Karachi

Project Type

Thesis

Access Type

Restricted Access

Document Version

Final

Pages

viii, 24

Subjects

Economics, Growth and Development

Abstract

We present a model of promises of foreign aid, stemming from Pakistan's bilateral and multilateral aid relationship during the 1980s and 1990s. According to the model , if there is promise of aid it is optimal to adjust expenditure and external debt instantaneously. If the promise is true, there is permanent increase in consumption and increase in external debt; however, the initial increase in external debt decrease with the flow of aid. If the promise is false, the outcome is sub optimal. The intermediate cases, such as when the promise is only partially true, are also analysed. The model is suggestive in explaining the nearly unsustainable levels of budget deficit and external debt of Pakistan over 1980-99.

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