Dynamic Effects of Energy Sector Public Investment on Sectoral Economic Growth: Experience from Pakistan Economy

Syed Ammad, Qazi Masood Ahmed


The successive economic and financial crisis in recent time
has reemphasised the importance of fiscal policy. Modern literature has
also revisited the debate regarding the effectiveness of fiscal policy
in influencing growth. The issue of the impact of public investment on
growth is debated in economic literature since seminal work of Solow
(1955). The issue is tackled from different angles. Some have used
production function approach [Ligthart (2002), Otto and Voss (1994,
1996), Sturm and de Haan (1995) and Wang (2004)]. Then another seminal
work by Aschauer (1989) led a series of work on this issue once again in
empirical literature (1989a, 1989b). These approaches used single
equation method for estimation and captured only the direct effects of
public investment on growth. Periera (2000) gave another twist to this
literature by highlighting the indirect effects of public investment on
output through its effects on other inputs like private investment and
employment. Periera’s works (1999, 2000, 2001, 2003, 2005, 2007 and
2011) also contributed empirically to this literature by using vector
autoregressive (VAR) technique. This work accounts for both the direct
and indirect effects of public investment on growth and also considers
the feedback effects of each input to other and finally their effects on

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DOI: https://doi.org/10.30541/v53i4IIpp.403-421


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