FISCAL IMBALANCE: EXPLORING THE LINK BETWEEN PAKISTAN’S BUDGET DEFICIT, INFLATION, AND UNEMPLOYMENT

Abstract

This study examines the impact of Pakistan’s budget deficit on inflation and unemployment, key macroeconomic variables critical for government policy and economic growth. Guided by Keynesian theory, three econometric models are used to analyze the relationship between budget deficit, inflation, and unemployment. Findings indicate that the budget deficit significantly influences both inflation and unemployment, highlighting the importance of sound fiscal policy in managing macroeconomic stability and promoting development.