Impact of Fiscal Policy on the Economy of Pakistan

Abstract

This research paper endeavors the relationship and the positive effect between tax rates, inflation rate and the balance of trade in Pakistan by utilizing the economic survey and current scenario of increasing tax rate because of increasing inflation rates and decreasing of balance of trade to represent the economic position of Pakistan. The data by the researcher was all on yearly basis for the above variables and the tax rate was being recorded by the direct and indirect from the period of 1979 to 2009. The research implement regression model to test the effect of tax rates progression on inflation rate rates and another 2-stage least square test of tax rate on balance of trade so in this result, shows that there was a significant impact in these variables. The study concluded on this way that there was no significant association between tax rates on inflation rate in Pakistan. There was the impact of tax rate on balance of trade