DefinePK

Abstract

Objective: A general objective belonging to this research includes the analysis of the influence of public debt on sustainable economic growth in Pakistan. It employs time series data records from 1980-2022.
Research Gap: Prior research does not produce strong conclusions that link the public debt to sustainable economic growth. While several studies have attempted to explore this relationship, most lack robust econometric testing or fail to consider the stationarity of data and long-run dynamics.
Design/Methodology/Approach: To start, through the ADF test, we can determine stationarity, especially when using econometric and statistical tools. To ensure that the order of all variables is I (1), this research uses a co-integration approach based on this conclusion. To this end, the aim of research is to address the public debt influence on economic growth, and as the dependent variable, the study considers Gross Domestic Product. Net trade and Foreign Direct Investment are also used in the model as exogenous variables along with external debt, debt service, and inflation.
The Main Findings: External debt, net trade, and inflation positively influence GDP, while debt servicing and FDI negatively affect growth.
Theoretical / Practical Implications of the Findings: The conclusion as presented in the paper shows that in measuring the effect of the public debt, variables known as Debt service and External debt are employed. According to the findings of the study, the longtime indicates higher foreign debt, net trade, and inflation as positive drivers of the Gross Domestic Product of Pakistan. However, debt servicing and Foreign Direct Investment are inversely related. So, these findings offer practical insight for policymakers to evaluate debt sustainability while considering the broader implications for economic growth.
Originality/Value: This research adds value by applying time series econometric techniques, specifically ADF testing and co-integration, to a 43-year dataset focused on Pakistan. It uniquely combines public debt indicators with trade, inflation, and FDI to offer a more comprehensive view of their collective impact on sustainable economic growth.