Abstract:

Pakistan is faced with budget deficit, high unemployment and slow growth. This study provides a link between defence spending, debt servicing, development expenditures and economic growth for Pakistan. We examine whether there is causality between defence expenditures and debt servicing on the one hand and economic growth on the other during the period 1988-2011, using Toda Yamamoto-Modified Standard Granger Causality technique. We find unidirectional causality between defence spending and economic growth and debt servicing and economic growth while bidirectional causality is found between development expenditure and economic growth and between current expenditure and economic growth.