Comparative analysis of monetary and fiscal Policy: a case study of Pakistan

This study investigates the comparative effect of fiscal and monetary policy on economic growth in Pakistan using annual time series data from 1981 to 2009. The cointegration result suggests that both monetary and fiscal policy have significant and positive effect on economic growth. The coefficient of monetary policy is much greater than fiscal policy which implies that monetary policy has more concerned with economic growth than fiscal policy in Pakistan. The implication of the study is that the policy makers should focus more on monetary policy than fiscal to enhance economic growth. The role of fiscal policy can be more effective for enhancing economic growth by eliminating corruption, leakages of resources and inappropriate use of resources. However, the combination and harmonization of both monetary and fiscal policy are highly recommended.