Abstract
This paper empirically examines the impact of external debt on socio economic
development in Pakistan. Pakistan has been accruing external debt over the last many
years considered being one of the potential threats to curb the issues and challenges of
poor masses around. This research applies the time series data ranging from 1981 to
2017. Johansen co-integration method is applied to discover the long run association
among economic growth, money supply, poverty, external debt and population growth in
two different models and results show one cointegrating equation in both models. Vector
Error Correction Model (VECM) is used to analyze the speed of adjustment when
economy faces any disequilibrium in short run. VECM indicates 31% speed of adjustment
for economic growth model and 29% for poverty model. The Variance decomposition
analysis and Impulse response function reveal that economy has witnessed debt-ledeconomic growth whereas on the other side it also results rise in poverty in Pakistan.
Malik Saqib Ali , Sadaf Shahab. (2018) The Effectiveness of External Debt: An Empirical Analysis of Pakistan Economy, NUML International Journal of Business & Management, Volume 13, Issue 2.
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