TITLE:
Fiscal Imbalances and Interest Rate Change in Pakistan: A Co-Integration Analysis
AUTHORS:
Zaeema Islam, Asghar Ali, Irfan Ahmad Baig, Sajjad Ahmad Baig, Muhammad Hashim, Muhammad Zia-Ur-Rehman
KEYWORDS:
Interest Rate, Co-Integration, Pakistan
JOURNAL NAME:
Theoretical Economics Letters,
Vol.5 No.5,
October
9,
2015
ABSTRACT: The study investigated
the relationship among fiscal deficit, public debt, inflation, international
interest rates and the interest rate change in Pakistan using time series data
for the period 1981-2011. Augmented Dickey Fuller Unit root test was used to
check stationarity of time series data. The study employed co-integration
approach to check the long-run relationship among variables. The findings of
the study showed a positive and significant relationship between explanatory
variables and interest rate change. The study suggested that the fiscal
deficit, public debt and double digit inflation should be controlled in order
to decrease the interest rate and interest rate fluctuation in Pakistan.