The Impact of Deficit Financing on Economic Growth: A Comparative Study of Pakistan and Malaysian Economies

The objective of this study is to investigate the impact of deficit-financing on economic growth of these two countries, using time series data from 1990 to 2020. Economic growth was taken as dependent variable and budget deficit, broad money growth, exports as percentage of GDP and FDI were chosen as independent variables. ARDL approach was applied to analyze the relationship between dependent and independent variables in the long run and short run. The findings of the study reveals that there is a strong positive relationship between deficit financing and economic growth in Pakistan but is weak Malaysia, while broad money growth, exports in both countries have positive association with economic growth. FDI also has positive effect on growth in Malaysia but negative effect on growth in Pakistan.