Agricultural Output, Inflation Rate, Fiscal Deficit and National Savings Nexus: Evidence from Pakistan

Year 2021, Volume: 5 Issue: 2, 115 - 133, 04.10.2021

Ghulam Sajid , Hajra Hafeez

Abstract

The goal of the article is to investigate the effect of agricultural output, fiscal deficit and inflation rate on national savings in Pakistan for the period of 1973-2020. To address the objective, autoregressive distributed lag (ARDL) model and error correction model (ECM) are applied for co-integration and short-run dynamics respectively. The outcomes of the study endorse that agricultural output and rate of interest have a significant positive impact on national savings whereas inflation rate and fiscal deficit negatively affect national savings both in the short and long run. The coefficient’ sign of the lagged error correction term helps us to conclude that the system has potential to come back to equilibrium position with 69 % adjustment annually. It is recommended that effort should be made to improve the productivity of the agricultural sector and curtail deficit and inflation rate to increase savings in the country.

Keywords

National savings, Agricultural output, Fiscal deficit, Inflation Rate

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