A Comprehensive Assessment of Fiscal Policy and Economic Development: An ARDL Analysis

Abstract

This paper examines the intricate relationship between fiscal policy and economic development, focusing on the case of Pakistan. Employing the ARDL methodology, we investigate the dynamic effects of various fiscal indicators on economic development over the period 1995-2018. The study employs a comprehensive set of variables, including the sustainable development index (SDI), labor force participation rate, gross fixed capital formation, secondary school enrollment gender parity index, government expenditures, tax revenues, public debt , budget deficit , development expenditures, non-development expenditures, direct taxes, indirect taxes, domestic debt, and external debt. The results explore that public spending exerts a significantly positive influence on sustainable development. Conversely, taxes, public debt, and budget deficit exhibit noteworthy negative and substantial effects on sustainable development.