Twin Deficit Dynamics Case Study of Pakistan

Pakistan constitutes a valuable case study for investigating the dynamics of persistently high rates of deficits. The budget and trade deficits occurred concurrently with acute macro economic imbalances and indebtedness, which is a major cause of concern. In Pakistan, little is known with authenticity, about the channels through which changes in these deficits percolate the macroeconomic system. Most of the studies conducted outside Pakistan, assert, some support for the maintained proposition that budget deficit, in so for lead to increase in money supply do cause inflation affects interest rates and trade deficit. But identification of the model, measurement and estimation, forecasting ability, applications of impulsive response functions and variance decompositions along with causality tests are still the matter of investigation. This book filled the gap by establishing the linkages of deficits with the macroeconomic variables of Pakistan economy in vector Autoregressive Model. The book therefore, provides extensive applications of VARMA and cointegration techniques. The book is highly recommendable for economists and graduate students.