Steering Sustainable Development via Prudent Policy Interventions: An Investigation into the Efficacy of Fiscal Policy Interventions on Sustainable Developed of a Developing Economy

This study examines the effects of fiscal policy on Pakistan's economic dynamics, using data for GDP, government spending, budget deficit, tax revenue, and unemployment from Pakistan's Economic Survey (ESP) and the World Development Indicators (WDI) from 1990 to 2022. The study applies VECM and Johansen Cointegration methods within a theoretical and empirical framework. The results reveal long-term cointegration between GDP and fiscal indicators, particularly government spending and tax revenues. In the long run, government spending and tax revenues have a significant positive impact on GDP. However, in the short run, government spending positively impacts GDP, while tax revenues negatively affect GDP. Both budget deficit and unemployment have a significant negative impact on long-term GDP growth. In the short term, the budget deficit shows a developing positive impact on GDP.