Exploring the Role of Fiscal Decentralization in Capital formation: Empirical Evidence from Pakistan

Abstract

The purpose of this paper was to investigate the impact of Fiscal decentralization on capital formation. Time series data from 1980-2018 were used for the assessment of the model through Auto Regressive Distributed Lag modelling technique. Empirical outcomes corroborated that government development expenditures had significant positive impact on capital formation in Pakistan. The impact of government expenditures on economy is seemed to be a very important element for economic progression in democratic countries. This study result indicates that it is vital for the Pakistani government to adopt the policy of increase in government expenditures in order to attain higher capital formation, a precondition for growth and development of the country.