In 2004, the federal budget deficit stood at $412 billion and reached 4.5 percent of gross domestic product (GDP). Though not at a record level, the deficit as a fraction of GDP is now the largest since the early 1980s. Moreover, the recent swing from surplus to deficit is the largest since the end of World War II (Figure 1). The flip side of deficit spending is that the amount of government de...

The study examined the relationship between Budget deficit and Trade deficit for the economy of Pakistan. Time series data was used from the period 1972 to 2011. Augmented Dickey Fuller Test used to check the stationary of the variables and found that all variables were stationary at first difference. Johansen Co-integration used to find the long relationship and found that budget deficit has p...

We examine incentive-compatible mechanisms for fair financing and efficient selection of a public budget (or public good). A mechanism selects the level of the public budget and imposes taxes on individuals. Individuals’ preferences are quasilinear. Fairness is expressed as weak monotonicity (called scale monotonicity) of the tax imposed on an individual as a function of his benefit from an inc...

Article History Received: 7 March 2017 Revised: 23 May 2017 Accepted: 14 June 2017 Published: 4 July 2017

Two years after speaking those words, President Reagan remains further from controlling the budget deficit than any President has ever been. The reasons for this are numerous and debatable. The direct result, however, is clear -a $110 billion deficit for Fiscal Year 1982, the largest deficit ever. Unfortunately, the record will not stand for long. By any estimate, the deficits will be well abov...

Conventional notions suggest that persistently high budget deficits give rise to inflation, which monetary policy on its own is powerless to prevent. However, empirical evidence does not provide convincing support for such a hypothesis. This paper reexamines the issue in the case of Pakistan using Johansen cointegration analysis. The empirical results suggest that in the long-run inflation is n...

The majority of existing literature on the twin deficits hypothesis focuses on its effects in economies already well developed. The theory suggests that there is a causal relationship between the budget deficit and trade deficit of a nation, a claim often debated in the economic community. This paper attempts to supplement existing literature by examining the causal relationship between budget ...