p.5
Optimal Level of Public Debt
What is the optimal level of public debt for economic growth according to Ashfaq & Padda (2019)?
Public borrowing negatively influences economic growth when it reaches 90% of GDP, after which its effect becomes irrelevant.
p.8
Optimal Level of Public Debt
What is the relationship between public debt and economic growth in Pakistan according to the ARDL results?
The ARDL results indicate that government debt has an inverted U-shaped association with growth, meaning that up to a certain level, public debt enhances GDP growth, but beyond that optimal level, further increases in debt lead to a decline in growth.
p.5
Impact of Government Borrowing on GDP
How does corporate debt influence GDP according to Stephen et al. (2011)?
Corporate debt has a negative influence on GDP when it reaches 90% of GDP.
p.7
ARDL Bound Test Technique
What is the suggested optimal lag length for the model based on the study?
The suggested optimal lag length is 3.
p.10
Optimal Level of Public Debt
What happens to economic growth when public debt exceeds the optimal level?
When public debt exceeds the optimal level of 60% of GDP, it is considered detrimental and can reduce economic growth in the long run.
p.9
Optimal Level of Public Debt
What do the stability tests based on CUSUM and CUSUM square indicate?
The stability tests indicate that coefficient values lie within critical limits of 5% level of significance, showing stability over the sample period.
p.8
Fiscal Deficit and Trade Deficit in Pakistan
What is the significance of trade openness in relation to economic growth?
The results support the view that trade openness stimulates growth, indicating a positive relationship between free trade and economic growth.
p.10
Recommendations for Fiscal Policy in Pakistan
What fiscal policy is suggested to control the debt burden in Pakistan?
A suitable fiscal policy is needed to control the debt burden and enforce the Fiscal Responsibility and Debt Limitation Act 2005.
p.2
Nonlinear Relationships between Debt and Growth
What is the classical theory's view on public debt?
Classical theory suggests that public debt is a burden to future generations and drags down investment in the long term.
p.2
Optimal Level of Public Debt
What role does foreign debt play in GDP enhancement?
A moderate amount of foreign debt may enhance GDP through capital formation and factor productivity.
p.7
ARDL Bound Test Technique
What is the null hypothesis of the bound test in the ARDL technique?
The null hypothesis is that there is no co-integration among the variables.
p.1
ARDL Bound Test Technique
What technique is used in the study to estimate the impact of public debt on economic growth?
The ARDL bound test technique is used to estimate the short-run and long-run impact of debt on economic growth.
p.10
Historical Trends of Public Debt in Pakistan
What was the level of public debt in Pakistan in 2016?
The level of public debt in Pakistan in 2016 was 64%, which was slightly above the optimal level of 60% of GDP.
p.6
ARDL Bound Test Technique
What does the Augmented Dicky Fuller (ADF) test indicate about the variables?
The ADF results show a mixture of level stationary I(0) and first difference stationary I(1) variables.
p.2
Impact of Government Borrowing on GDP
How can public debt help in managing fiscal deficits?
Public debt plays a vital role in removing fiscal deficits and increasing investment in developing countries like Pakistan.
p.6
ARDL Bound Test Technique
What critical values did Narayan present for smaller data sizes?
Narayan presented critical values of the F-Test for data sizes with 30 to 80 observations.
p.7
ARDL Bound Test Technique
What does the F-statistic value of 5.78 indicate in the context of the bound test?
It indicates that the value is higher than the critical 1% level of significance, confirming co-integration among the variables.
p.7
Optimal Level of Public Debt
What controlled variables were considered in the study regarding public debt and economic growth?
Controlled variables include population growth and trade openness.
p.8
Nonlinear Relationships between Debt and Growth
What variables are co-integrated with economic growth in the long run?
In the long run, total tax revenue and long-term interest rates are co-integrated with economic growth adversely, while total factor productivity (TFP) and investment (GFCF) are directly co-integrated with growth.
p.5
Optimal Level of Public Debt
What is the main objective of the study regarding public debt in Pakistan?
To find out the growth maximizing optimal level of debt for Pakistan.
p.4
Optimal Level of Public Debt
What range of GDP borrowing has a positive influence on GDP according to Pham et al. (2014)?
Between 13 to 39 percent of GDP.
p.11
Optimal Level of Public Debt
What does Diamond's (1965) model suggest about national debt?
Diamond's neoclassical growth model suggests that national debt has implications for economic growth over the long run.
p.3
Optimal Level of Public Debt
How does a higher burden of external debt affect investment and GDP growth in the long run?
A higher burden of external debt negatively affects investment, which ultimately impacts GDP growth in the long run.
p.3
Fiscal Deficit and Trade Deficit in Pakistan
What was the fiscal deficit of Pakistan on average as a percentage of GDP?
The economy of Pakistan has experienced an average fiscal deficit of 6.5% of GDP.
p.7
Optimal Level of Public Debt
How does public debt affect economic growth in Pakistan according to the study?
Public debt in linear form is positively co-integrated with growth in the long run, while in square form it has a negative effect on GDP growth after a certain level.
p.6
Optimal Level of Public Debt
What was the average growth rate during the sample period in the study?
The average growth rate was 4.9% per annum.
p.1
Recommendations for Fiscal Policy in Pakistan
What should the government of Pakistan focus on to control public debt?
The government should focus on fiscal and current account deficit, which are the main causes of increasing public debt.
p.10
Fiscal Deficit and Trade Deficit in Pakistan
What is one of the main causes of increasing public debt in Pakistan?
The budget and trade deficit are the main causes of increasing public debt in Pakistan.
p.3
Optimal Level of Public Debt
What is the relationship between external borrowing and macroeconomic stability according to Burnside and Rebelo (2001)?
Borrowing from external sources creates macroeconomic stability through productive investment.
p.11
Recommendations for Fiscal Policy in Pakistan
What are the implications of fiscal policy on welfare costs in Pakistan?
Padda (2010) discusses strategies for minimizing the welfare cost of fiscal policy in Pakistan, emphasizing the importance of effective fiscal management.
p.11
Fiscal Deficit and Trade Deficit in Pakistan
How does fiscal decentralization affect economic growth in Pakistan?
Hyder and Akram (2011) provide an appraisal of fiscal decentralization in Pakistan, indicating its potential effects on economic growth.
p.9
Optimal Level of Public Debt
What does the Fiscal Responsibility and Debt Limitation Act (FRDL) 2005 of Pakistan suggest regarding public debt?
The FRDL 2005 suggests that public debt should remain below 60% of GDP to promote economic growth.
p.4
Impact of Government Borrowing on GDP
What does the literature suggest about the crowding out effect of public debt?
Public debt has a crowding out effect when it is not properly utilized.
p.2
Optimal Level of Public Debt
Why is economic growth important for developing economies?
Economic growth is imperative for developing economies to attain sustainable development in the long run.
p.5
Historical Trends of Public Debt in Pakistan
What time period does the study examine for the impact of government debt on economic growth in Pakistan?
The study examines the period from 1973 to 2018.
p.2
Short-run vs Long-run Effects of Public Debt
What are the potential negative effects of excessive public debt?
Excessive debt can reduce the economy’s ability to distribute important services to its residents and negatively impact economic growth.
p.3
Historical Trends of Public Debt in Pakistan
What was the peak public debt level in Pakistan and in which year did it occur?
The peak public debt level in Pakistan reached 102% of GDP in 2001.
p.3
Historical Trends of Public Debt in Pakistan
What was the public debt growth rate in Pakistan during the period of 2000-2015?
During 2000-2015, public debt of Pakistan increased by 12.6% per year.
p.9
Optimal Level of Public Debt
What maximum growth rate can be achieved with the optimal level of borrowing in Pakistan?
With the optimal level of borrowing, growth can reach a maximum of 5.3% per annum.
p.1
Impact of Government Borrowing on GDP
What is the relationship between government borrowings and economic growth in the long run?
Increase in government borrowings will raise economic growth in Pakistan in the long run.
p.8
Short-run vs Long-run Effects of Public Debt
What does the error correction term (ECM) indicate in the context of public debt and economic growth?
The ECM value, which is negative and significant, indicates that any shock or policy effect will be corrected within a year, showing the speed of adjustment in the system.
p.5
Nonlinear Relationships between Debt and Growth
What method is commonly used to find the optimal level of public debt?
Nonlinear estimation is commonly used, often by adding a quadratic term of public debt.
p.4
Nonlinear Relationships between Debt and Growth
What is the main aim of the study discussed in the text?
To explore the nonlinear relations between government borrowing and GDP growth of Pakistan.
p.10
Impact of Government Borrowing on GDP
How does a higher interest rate affect economic growth according to the study?
Higher interest rates curb economic growth, indicating that the current policy of keeping high interest rates should be revisited.
p.11
Impact of Government Borrowing on GDP
What does the literature suggest about the effects of debt burden on economic growth in developing nations?
Rosemary (1993) highlights that a heavy debt burden can significantly impede economic growth in heavily indebted developing nations.
p.3
Fiscal Deficit and Trade Deficit in Pakistan
What fiscal deficit percentage was recorded in Pakistan during 2013?
The fiscal deficit was recorded at 8.2% of GDP during 2013.
p.9
Optimal Level of Public Debt
What is the optimal level of public debt for economic growth in Pakistan according to the study?
The optimal level of public debt for economic growth in Pakistan is considered to be below 60% of GDP.
p.10
Optimal Level of Public Debt
What is the optimal level of public debt for economic growth in Pakistan according to the study?
The optimal level of government debt for economic growth in Pakistan is 60% of GDP.
p.9
Optimal Level of Public Debt
What assumption is made regarding the optimal level of public debt in the study?
The optimal level of debt is estimated under the assumption of 'ceteris paribus', meaning other variables are held constant.
p.4
Optimal Level of Public Debt
What is the growth maximizing level of public debt for Zimbabwe according to Mupunga and Le (2015)?
80 percent of GDP borrowing.
p.2
Fiscal Deficit and Trade Deficit in Pakistan
What challenges do developing countries face that impact economic growth?
Developing countries face challenges like fiscal deficit, trade deficit, low saving to investment ratio, and low economic growth.
p.3
Historical Trends of Public Debt in Pakistan
What was the average public debt of Pakistan as a percentage of GDP from 1973 to 2018?
The average public debt of Pakistan was 69.5% of GDP from 1973 to 2018.
p.2
Historical Trends of Public Debt in Pakistan
How does internal debt affect the economy?
Internal sources of debt can affect the economy through inflation and interest rates.
p.5
Nonlinear Relationships between Debt and Growth
What does the U-shaped association indicate regarding government borrowing and GDP per capita?
Government borrowing maximizes growth until it reaches 80% of gross domestic product.
p.1
Short-run vs Long-run Effects of Public Debt
What happens to economic growth in the short run if public debt increases?
In the short run, if public debt increases, it will boost economic growth after some levels of public debt, but will start declining thereafter.
p.10
Recommendations for Fiscal Policy in Pakistan
What should the government do to reach the optimal level of public debt?
The government should reduce borrowing to reach the optimal level of 60% of GDP to avoid adverse effects on economic growth.
p.6
ARDL Bound Test Technique
What econometric method is recommended when variables are integrated at level I(0) and first difference I(1)?
The Auto-Regressive Distributive Lag (ARDL) method is recommended.
p.11
Impact of Government Borrowing on GDP
How does public debt affect productivity growth in Malaysia?
The study by Haris and Mohammad (2015) indicates that federal government debt levels have a significant impact on productivity growth in Malaysia.
p.2
Impact of Government Borrowing on GDP
What is debt overhang?
Debt overhang is a situation in which an economy is unable to repay its debt, leading to adverse effects on growth.
p.11
Impact of Government Borrowing on GDP
What are the channels through which external debt affects growth?
Ward et al. (2004) explore various channels, including investment and consumption, through which external debt can impact economic growth.
p.1
Optimal Level of Public Debt
What is the optimal level of public debt for economic growth in Pakistan according to the study?
The optimal level of public debt is 60% of GDP.
p.5
Optimal Level of Public Debt
What debt threshold level is identified for organizations of economic corporations and developing countries?
The debt threshold level is around 85% of GDP.
p.6
Optimal Level of Public Debt
What was the average borrowing as a percentage of GDP?
The average borrowing as a percentage of GDP was 69.88%.
p.8
Impact of Government Borrowing on GDP
How does public borrowing affect economic growth in the short run?
In the short run, public borrowing has a significant quadratic association with economic growth, where an increase in public debt initially boosts growth, but after reaching a certain level, it starts to decline.
p.11
Impact of Government Borrowing on GDP
What is the impact of high government debt on economic growth in the Euro Area?
High government debt negatively impacts economic growth through various channels, as investigated in the empirical study by Cristina and Philipp (2012).
p.6
ARDL Bound Test Technique
How many observations were used in the study?
The study used a small sample size of 43 observations.
p.2
Short-run vs Long-run Effects of Public Debt
How does the Keynesian argument differ regarding government borrowing?
The Keynesian argument states that government borrowing can encourage economic activity in the short run.
p.3
Recommendations for Fiscal Policy in Pakistan
What was the outcome of the debt reduction strategy implemented by the government in the early 2000s?
As a result of the policy, public debt level sharply declined to 57% by 2007.
p.6
Optimal Level of Public Debt
What were the maximum and minimum values of public debt as a percentage of GDP?
The maximum value was 102% and the minimum value was 48% of GDP.
p.1
Recommendations for Fiscal Policy in Pakistan
What is the implication of higher interest rates on economic growth?
Higher interest rates curbs economic growth, therefore, the current policy of keeping high interest rates should be revisited.
p.5
Impact of Government Borrowing on GDP
What variables are included in the growth model used in the study?
Investment, population growth, public debt, tax revenue, real interest rate, openness, and exchange rate.
p.11
Nonlinear Relationships between Debt and Growth
What is the relationship between public debt and economic growth in developing countries?
Research indicates that there is a threshold in the relationship between public debt and economic growth, suggesting that excessive debt can hinder growth.
p.11
ARDL Bound Test Technique
What is the significance of the ARDL Bound Test Technique in analyzing public debt?
The ARDL Bound Test Technique is crucial for examining the level relationships between public debt and economic growth, as shown by Pesaran et al. (2001).