Economic Growth, Public Debt, and Budget Deficit Dynamics in Pakistan: Evidence from an ARDL Approach

Abstract

The current study has unfolded the relationship of economic growth, internal debt, external debt and budget deficit of Pakistan. ARDL methodology was applied to annual time series from 1980 to 2018; Bound test gauged the long run relationship among economic growth, internal debt, external debt and budget deficit of Pakistan. Results reveal the presence of long run association of economic growth, internal debt and external debt of Pakistan at 5% level of significance. Consequently, economic growth and budget deficit have significant long run association at 8% level of significance. Significant positive influence found in long run external debt, whereas negative impacts in short run on budget deficit. However, internal debt exhibits negative significant influence on budget deficit.