ARTICLE

MACROECONOMIC POLICY COORDINATION AND MACROECONOMIC INSTABILITY IN PAKISTAN

12 Pages : 116-130

http://dx.doi.org/10.31703/grr.2024(IX-III).12      10.31703/grr.2024(IX-III).12      Published : Sep 2024

Macro-Economic Policy Coordination and Macro-Economic Instability in Pakistan

    This study is intended to examine the impact of macroeconomic policies on macroeconomic instability in Pakistan. This study used time series data for the period of 1990 to 2022.  To deal with the stationarity of the data ADF and PP tests are used which suggest the use of ARDL. The existence of a long-run relationship is confirmed by the Bound test. The impact of fiscal & monetary policy is found to be significant in the long run. The impact of the fiscal policy variable (GEXP) on macroeconomic instability (MI) negatively means that an increase in GEXP (expansionary fiscal policy) leads to a decrease in MI while the impact of monetary policy variable IR (tight monetary policy) is found positive and significant in the long run means that the impact of tight monetary policy leads to increase MI. Similarly, the impact of expansionary fiscal policy on MI is effective but the monetary policy variable is effective in the short run. The impact of domestic investment is found to be negative and significant means that an increase in domestic investment leads to a decrease in MI. Therefore this study suggests that special attention should be paid to fiscal and monetary policies to deal with MI in Pakistan.

    Fiscal Policy, Monetary Policy, Macroeconomic Instability, Time-series and Pakistan
    (1) Sher Ali
    Associate Professor, Department of Economics, Islamia College Peshawar, KP, Pakistan.
    (2) Sawera Saeed
    BS Student, Department of Economics, Islamia College Peshawar, KP, Pakistan.
    (3) Asma Saeed
    MPhil Scholar, Department of Economics, Islamia College Peshawar, KP, Pakistan.
  • Abata, M. A. (2014). The impact of tax revenue on Nigerian economy : Case of Federal Board of Inland Revenue. Deleted Journal, 9(1), 109–121. https://doi.org/10.12816/0011186

  • Barro, R. J., & Sala-i-Martin, X. (1995). Government spending, taxes, and economic growth.
  • Blanchard, M. O. J. (2009). The crisis: Basic mechanisms and appropriate policies. International Monetary Fund. https://www.imf.org/en/Publications/WP/Issues/2016/12/31/The-Crisis-Basic-Mechanisms-and-Appropriate-Policies-22758
  • Canzoneri, M., Cumby, R., Diba, B., & López-Salido, D. (2010). The role of liquid government bonds in the great transformation of American monetary policy. Journal of Economic Dynamics and Control, 35(3), 282–294. https://doi.org/10.1016/j.jedc.2010.10.008 
  • Dolamore, R. (2014). The tools of macroeconomic policy: A short primer.
  • Hilbers, P., Otker-Robe, I., Pazarbasioglu, C., & Johnsen, G. (2005). Assessing and managing rapid credit growth and the role of supervisory and prudential policies. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.782908 
  • Ilyas, M., & Ali, S. (2023). Skills and Employability of Graduates: The Role of Skills Development Programs in District SWAT. iRASD Journal of Economics, 5(1), 687–699. https://doi.org/10.52131/joe.2023.0501.0108 
  • Kraay & Seven (2008) Aggregate and Individual Governance Indicators.
  • Krugman, P. (1999). Balance sheets, the transfer problem, and financial crises. International tax and public finance, 6, 459-472.
  • Liao, H., Wei, Y., Ali, S., Uktamov, K. F., & Ali, N. (2023). Natural resources extraction and industrial expansion: Natural resources a curse or blessing for the industrial sector of China? Resources Policy, 85, 103986. https://doi.org/10.1016/j.resourpol.2023.103986 
  • Stiglitz, J. E. (2000). Capital market liberalization, economic growth, and instability. World Development, 28(6), 1075–1086. https://doi.org/10.1016/s0305-750x(00)00006-1 
  • Ullah, I., Qian, X., Shah, M. H., Rehman, A., Ali, S., & Ahmed, Z. (2020). FORECASTING WAGES INEQUALITY IN RESPONSE OF TRADE OPENNESS IN PAKISTAN: AN ARTIFICIAL NEURAL NETWORK APPROACH. The Singapore Economic Review, 68(06), 1875–1890. https://doi.org/10.1142/s0217590820500058 
  • Wahid, F., Ullah, H., Ali, S., Jan, S. A., Ali, A., Khan, A., ... & Bibi, M. (2021). The determinants and forecasting of electricity consumption in Pakistan. International Journal of Energy Economics and Policy, 11(1), 241-248.

Cite this article

    CHICAGO : Ali, Sher, Sawera Saeed, and Asma Saeed. 2024. "Macro-Economic Policy Coordination and Macro-Economic Instability in Pakistan." Global Regional Review, IX (III): 116-130 doi: 10.31703/grr.2024(IX-III).12
    HARVARD : ALI, S., SAEED, S. & SAEED, A. 2024. Macro-Economic Policy Coordination and Macro-Economic Instability in Pakistan. Global Regional Review, IX, 116-130.
    MHRA : Ali, Sher, Sawera Saeed, and Asma Saeed. 2024. "Macro-Economic Policy Coordination and Macro-Economic Instability in Pakistan." Global Regional Review, IX: 116-130
    MLA : Ali, Sher, Sawera Saeed, and Asma Saeed. "Macro-Economic Policy Coordination and Macro-Economic Instability in Pakistan." Global Regional Review, IX.III (2024): 116-130 Print.
    OXFORD : Ali, Sher, Saeed, Sawera, and Saeed, Asma (2024), "Macro-Economic Policy Coordination and Macro-Economic Instability in Pakistan", Global Regional Review, IX (III), 116-130
    TURABIAN : Ali, Sher, Sawera Saeed, and Asma Saeed. "Macro-Economic Policy Coordination and Macro-Economic Instability in Pakistan." Global Regional Review IX, no. III (2024): 116-130. https://doi.org/10.31703/grr.2024(IX-III).12