The Demand Management Policies And Macro Economics Performance In Pakistan

Abstract

Though there is enough literature available about the impact of monetary and fiscal policies on economic growth. But according to my best knowledge no study has to investigate the impact of demand management policies on macroeconomic performance. Economic performance usually assessed in terms of achievement of economic objective. That’s why in this study we see the impact of demand management policies on macroeconomic performance in Pakistan that covers all the short term and long term objectives of these policies using time series data from 1980-2017. By applying ARDL technique two models regarding these policies are discussed. One is concerned to monetary policy and economic performance and second is related to fiscal policy and economic performance. The long run results of this study show that all fiscal variables positively affect growth and performance of a country but monetary policy variables like exchange rate, lending interest rate and money market rate negatively affect on economic performance whereas broad money and inflation positively affect the economic performance of a country. This study suggests that to achieve macroeconomic objectives the combination of both policies is required because Pakistan is a fiscal dominant country where monetary policy has to face some constraints that’s why coordination among monetary and fiscal authorities is required to achieve its objectives that are helpful to stimulates economic performance of Pakistan.

Keywords: Macroeconomic Performance Index, Fiscal Policy, Monetary Policy, ARDL

JEL Classification: E37, E62, E52