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Title An Empirical Assessment of Monetary and Fiscal Policy Coordination with Public debt in Pakistan: A Time Series Analysis

Author(s) Ms Maqdas Bano

Abstract The development of monetary and debt management procedures that work in tandem with each other would be self-reinforcing, so the coordination of fiscal and monetary policies would give rise to a better result in any of the above scenarios. This would be the case because the development of such procedures would be mutually reinforcing. The objective of the study is to analyze the effects of monetary policy coordination on public debt and to analyze the effects of fiscal policy coordination on public debt. To examine the coordination of fiscal and monetary policy with public debt, we select the South Asian country Pakistan, this paper covers annual time series data from 1980 to 2020. Augmented Dickey-Fuller (ADF) and the Phillips-Perron (PP) test were utilized in order to determine the order of integration and for the purpose of checking stationarity. Estimates of the Markov-switching model were derived for each of the policy reaction functions. We analyze each model's transition probability as well as the predicted duration of each regime, and we will use this information to determine the extent of the coordination that exists between monetary and fiscal policy. This study implies that Pakistan's monetary policy operates differently depending on the economic conditions that are currently in place and the policy aims that are being prioritized. The coefficients that were connected with these variables revealed their influence on the process of making fiscal decisions, and the coefficients' negative values suggested that these variables had a dampening effect on fiscal sustainability. The findings of the study on the dynamics and sustainability of fiscal policy in Pakistan give useful insights for policymakers. Policymakers can improve the coordination of fiscal policy, adopt proactive measures, prioritize economic growth and external management, perform regular assessments, stimulate additional research, and boost fiscal openness and accountability if they execute the recommended methods

Type Thesis/Dissertation MS

Faculty Management Sciences

Department Economics

Language English

Publication Date 2024-01-10

Subject Economics

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