Budget Deficit and Private Investment: An investigation to Pakistan’s Economy

Abstract

The study scrutinizes the nexus between business freedom, budget deficit, and remittances that crowding-out or crowding-in private investment in Pakistan over the period of 1991 to 2015. The data has been taken from Pakistan Bureau of Statistics, the State Bank of Pakistan, and the World Bank. The sample size taken in the study is 25 as the entire variable met the assumptions of the model. The Ordinary Least Square (OLS) approach has employed for empirical analysis. The focused objective of the study has to find out whether deficit, business freedom and remittances budget positively or negatively affect private investment. The researcher has used budget deficit, business freedom and remittances as explanatory variables and private investment as the dependent variable. The conclusion of the present research study depicts the negative linkage between budget deficit and private investment. In contrast, business freedom, and private investment depict a positive relationship between them. Hence, from the evidence of the study, the researcher investigated that there exists both crowed-out and crowed-in effect between private investment.