Khan, Abdul Qayyum Khan and Khattak, Naeem Ur Rehman Khattak and Hussain, Anwar Hussain (2008): Inter-dependencies and Causality in the Macroeconomic Variables: Evidence from Pakistan (1960-2005). Sarhad J. Agric. 24 (1): 199-205. Published in: Sarhad Journal of Agriculture , Vol. 24, No. 1 (2008): pp. 199-205.
Download (67kB) | Preview
This paper critically evaluates the inter-relationship, vulnerability to innovation, and causality among the macroeconomic variables (budget deficit, economic growth, unemployment and poverty). Annual data for the period 1960-2005 is used, taken from Economic Survey of Pakistan and International Financial Statistics. Vector Autoregressive (VAR) model with impulse response function (IRF), error variance decomposition and Granger Causality test is used for the analysis. The study revealed that any innovation of one standard deviation took seven years for economic growth and budget deficit, eight years for unemployment and more than ten years for poverty reduction. The response of the macroeconomic variables to innovation or impulses introduced is mostly explained in their own. Only two unilateral causality are found. Bilateral causality is not found, and mostly independent type relationships are detected. Based on the finding of the study it is recommended, that target oriented fiscal policies should be focused on and the gap between policy formation and implementation must be reduced.
|Item Type:||MPRA Paper|
|Original Title:||Inter-dependencies and Causality in the Macroeconomic Variables: Evidence from Pakistan (1960-2005). Sarhad J. Agric. 24 (1): 199-205.|
|English Title:||Inter-dependencies and Causality in the Macroeconomic Variables: Evidence from Pakistan (1960-2005). Sarhad J. Agric. 24 (1): 199-205.|
|Keywords:||interdependency in macroeconomic variables; causality in macroeconomic variables|
|Subjects:||B - History of Economic Thought, Methodology, and Heterodox Approaches > B2 - History of Economic Thought since 1925 > B22 - Macroeconomics
A - General Economics and Teaching > A1 - General Economics > A10 - General
|Depositing User:||ANWAR HUSSAIN|
|Date Deposited:||22. Oct 2012 13:16|
|Last Modified:||08. Nov 2014 20:05|
Ahking, F.W. and S. M. Miller. 1985. The relationship between government deficits, money growth, and inflation. J. Macroeconomics.7: 447-467.
Al-Khedair, S. I. 1996. The impact of the budget deficit on key macroeconomic variables in the major industrial countries”. Ph.D dissert. Florida Atlantic Univ.
Bahmani, O.M. 1999. The federal budget deficits crowd out or crowd in private investment. J. Policy Modeling. 21 (5): 633-640.
Burney, N.A. and N. Akhtar. 1992. Government budget deficits and exchange rate determination: evidence from Pakistan . The Pakistan Dev. Review. 31 (4): 871-882.
Cebula, R. 1988. Federal government budget deficitsand interest rate: a brief note. Southern Econ. J. 55(1): 206-210.
Darrat, A.F. 1985. Inflation and federal budget deficits: some empirical results. Public Finance Quarterly. 13: 206-215.
Darrat, A.F. 2000. “Are Budget Deficits Inflationary, A Reconsideration of the Evidence. Applied Econ.7(10): 633-636.
Dwyer, G.P 1982. Inflation and Govt. deficits. Econ. Inquiry.20: 315-329.
Ghali, K.H. 1997. Government spending and economic growth in Saudi Arabia”. J. Dev. Econ. 22(2):165-172.
Govt. of Pakistan. Pakistan Econ. Survey, Various Issues, Islamabad.
Guess, G. and K. Koford. 1984. Inflation, recessionand the federal budget deficit (or blaming economic problems on a statistical mirage). Policy Science. 17: 385-402.
Hondroyiannis, G. and E. Papapetrou. 1994. Cointegration, causality and Govt. budget-inflation relationship in Greece. Applied Econ. Letters.1: 204-206.
Hussain, F. and T. Mahmood. 2001. The stock market and the economy of Pakistan. The Pakistan Dev. Review. 40(2): 107-114.
IMF. 2003. Int. Financial Statistics.Washington, D.C. Int. Monetary Fund.
Johansen, S. 1988. Statistical analysis of cointegrated vectors. J. Econ. dynamics and control. 12: 231-254.
Johansen, S. 1991. Estimation and hypothesis testing of cointegrating vectors in Gaussian vector autregression models. Econometrica. 59: 551-1580.
Karras, G. 1994. Macroeconomic effects of budget deficits: further international evidence. J. Int. Money and Finance. 13: 190-210.
Nishat, M. and M. Saghir 1991. The stock market and Pakistan economy. Savings and Deve. 15(2):131-145.
Sims, C.A. 1972. Money, income and causality”. American Econ. Review. 62: 540-552.