2018

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Browsing 2018 by Author "Noreen Razzaq"

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    The Impact of Fiscal Reforms and Socioeconomic Conditions on Fiscal Deficit
    (UMT, Lahore, 2018) Noreen Razzaq
    The present study tests the impact of fiscal reforms and institutional related variables in the presence of per capita GDP, official development aid, foreign direct investment and interest rate as control variables on fiscal deficit. The study uses Ng – Perron (2001) unit root test to find out order of integration of the variables whereas, long run co-integrating relation between fiscal deficit and fiscal reforms in the presence of control variables will be found by using ARDL co-integration technique. Later on, long and short run coefficients will be found for the selected ARDL model. In the end, using graphical representation of CUSUM and CUSUM square, the study will diagnose whether mean and variance of error term will remain stable during the selected sample or not? The results of Ng – Perron unit root test disclose mixed order of integration and show that some variables are stationary at level and some are at first difference. Afterwards, the results of co-integration test expose that calculated values of F – statistic of Wald test are found to be larger than the corresponding upper critical bounds in all the four specifications and confirms evidence of long run co-integrating relation between fiscal deficit and fiscal reforms along with some control variables for Pakistan. The results further demonstrate that fiscal reforms and socio economic conditions are significantly decreasing fiscal deficit in long and short run and hence conclude that they are important factors to cut down fiscal deficit in Pakistan. The empirical results also disclose that decrease in interest rate significantly reduces fiscal deficit in Pakistan. Besides this all the findings are robust to all the diagnostics which are used in this study. In the end, the graphical representation of CUSUM and CUSUM square report that mean and variance of error term are stable during the period 1980 to 2015. Therefore, the estimated long and short run coefficients are stable during the selected sample in Pakistan.