The Macroeconomics of Public Sector Deficits: The Case of PakistanPakistan's fiscal deficit remains high because of the government's inability to mobilize new resources or to cut current expenditures. Yet, unlike other developing countries with high fiscal deficits, Pakistan has experienced neither hyperinflation nor debt rescheduling. This can be attributed to high growth and to the availability of concessional external financing and domestic nonbank borrowing. |
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1/2 percent Augmented Dickey-Fuller test averaged base money behavior central bank Chart 12d coefficient cointegrating regression commercial banks composition of deficit consumption function currency current account deficit financing deficits and inflation deficits in Pakistan depreciation developing countries disposable income domestic debt domestic nonbank borrowing effects of fiscal eighties equation error-correction estimated exchange rate external debt external financing external funds Figure fiscal adjustment fiscal policy foreign GDP deflator government consumption growth of base high fiscal deficits higher hyperinflation indirect taxes inflation rate inflation tax Instrumental variables macroeconomic macroeconomic performance money financing nominal interest rate Pakistan's fiscal deficit Panel percent deviations percent of GNP period permanent income portfolio price level private capital stock private consumption private investment public capital stock public consumption public investment public sector deficit rate of inflation Real GDP real output remittances root tests seignorage simulations spending tax revenue trade balance trade taxes unit roots