The Impact of Monetary and Fiscal Policy on Economic Growth: A Case Study of Pakistan

Abstract

The study observes the potency of the policies on the growth of Pakistan’s economy in an open economy. The study includes time series analysis and the data from 1994 to 2023 is extracted from WDI. In the empirical study, the test such as Augmented Dickey-Fuller and Philip-perrons unit root tests were conducted and the results shows stationarity in data. The Johansen integration was analyzed to observe the association between dependent variables, GDP as the economic growth of Pakistan, and independent variables. The observations are made on the fiscal policy for which variables like government expenditure and trade openness and monetary policy is defined by using a measure of money supply. The ARDL technique is analyzed by using EViews. The study suggests that a mitigated planning of policy is required for stability in economic activity. The monetary and fiscal policy is effective for the planning in development for the economic enhancement of Pakistan, but only if the policy-maker authorities utilize stable fiscal policy and monetary techniques while analyzing and implementing these policies. Any of these policies is not effective alone for influencing economic activity in Pakistan.