Nexus Between Public Debt And Economic Growth: A Time Series Analysis Of Pakistan

Abstract

This study aims to analyze the relationship between Pakistan's public debt and economic development. The study employed the time series data from 1973 to 2021. Public debt, inflation, and gross fixed capital formation is used as explanatory variables, while GDP as dependent variable. According to the short-run regression results, an increase in public debt has a favorable impact on Pakistan's economy's short-term GDP growth. On the other side, inflation has a detrimental effect on GDP growth in the short term. The short-term growth of the economy is not sig[1]nificantly impacted by gross fixed capital formation. The long-term outcome demonstrated that Pakistan's public debt had a detrimental impact on economic growth. According to the results, public debt negatively affects economic growth, which is consistent with the findings of other studies. In order to address the problem of public debt and foster economic growth in Pakistan, the study emphasizes on reliable strategies to decline the debt. The study emphasizes the importance of implementing strategy methods to discourse the issue of public debt and promote economic growth in Pakistan.