Abstract
The present study examined the impact of fiscal policy on the current account in Pakistan
taking into consideration the data set from 1991 to 2018. The analysis is conducted using
the Vector AutoRegression (VAR) approach. The results specify that fiscal policy shocks
lead to an improvement in the current account balance and depreciate the real exchange
rate, supporting the twin-divergence hypotheses. It is suggested that the government
should focus on the polices to improve investment, which not only helps to minimize fiscal
deficit but also leads to long-run growth.
Fareeha Safdar, Attiya Y. Javid, Ihtsham Ul Haq Padda. (2020) Can Fiscal Policy Influence Current Account Deficit in Pakistan?, NUML International Journal of Business & Management, Volume 15, Issue 1.
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