The Magnitude And Dimension Of Output Multipliers In Pakistan: A Structural VAR Analysis
Author: Muhammad Azeem Sarwar

Output multipliers are widely used for studying the fiscal policies in different countries. After the Financial Crisis of 2007-08, especially, plethora of research have been conducted on this topic. This study attempts to find the impact of fiscal variables (government spending and taxes) on the GDP of Pakistan. This study employs the time series data over the period 1977-2016 and uses the Structural Vector Autoregressive (SVAR) model using identification scheme of Blanchard and Perotti (2002). The study finds that impact multiplier of the government spending is 1.9 i.e. in excess to unity which is expected by the standard Keynesian-Kaleckian theory. Tax multiplier is approximately zero on impact, turn negative for 2nd and 3rd lags and then turn positive for 4‘h lag after which it vanishes to zero in the longer run. Study suggests in the light of the findings that government spending should be increased as it has a significant role in the economic growth process of Pakistan and that tax base should be widened to achieve a balanced budget in the Pakistan. Supervisor:- Dr. Sajid Amin Javed

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Supervisor: Sajid Amin Javed

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