current account dynamics and fiscal deficit

تاریخ : فروری ۲۰۱۵ - جولائی ۲۰۱۵

The objective of this paper is to empirically investigate the relationship between fiscal deficit and current account dynamics in cause of Pakistan. In this paper annual time series data set has been used from the period of 1975 to 2010.The ARDL cointegration approach and Granger-causality test have been applied to find the long run relationship and casual relationship between the variables. The ARDL result suggests that there exist a long run relationship between fiscal deficit and current account dynamics in the favor of Mundell–Fleming model. Granger-causality test show that the bidirectional causal relationship of current account dynamics with public debt and workers remittance. While, unidirectional causality found between fiscal deficit and public debt. This study suggested that government need to be thoughtful financing about in its fiscal account. Investment gap should be reduced in the economy through the habit of saving.