Pakistan Journal of Applied Economics

13-28

Authors: Abdul SALAM*

The paper has examined and analyzed the domestic producer and international prices of wheat, basmati and IRRI paddy during 1996-06. The analysis has suggested deterioration in the purchasing power of these foodgrains as their annual increases fell short of the general price increase in the economy. The analyses of domestic and international prices during the study period suggest negative protection to domestic production of wheat averaging between 30-34 per cent per year, of basmati paddy varying from 12 to 20 per cent and huge transfer of resource from the producers of these crops. The comparison of domestic prices of IRRI paddy with the export parity prices, estimated at the official exchange rate, generally suggests positive protection to its domestic production averaging at 6 per cent per year. However, when export parity prices are estimated at the equilibrium exchange rate the overall picture changes to one of negative protection or implicit taxation averaging at 4 per cent per year.

47-65

Authors: Benjamin Ayodele FOLORUNSO and Anthony Enisan AKINLO*

The paper investigates the determinants of aggregate private investment and determines the long-run relationship between macroeconomic uncertainty and aggregate private investment decisions in Nigeria between 1970 and 2006. Cointegration and error correction modeling techniques is adopted in the estimation of aggregate private investment models. The results show that private investment in Nigeria is significantly and positively affected by income, public investment and credit to private sector while it is negatively affected by real interest rates and the size of debt. The paper further reveals that inflation rate, exchange rate and fiscal deficit uncertainties are most detrimental to private investment recovery in Nigeria. The paper concludes that the key to private investment recovery and economic growth in Nigeria is in reducing the overall level of macroeconomic uncertainty.

77-99

Authors: Ihtsham ul Haq PADDA*

This study analyzes the continued and separate fiscal policy options regarding taxes, expenditures and public debt for Pakistan. It evaluates the plausibility of an important hypothesis that seeks to maintain a balance between raising resources, increasing expenditures and contracting public debt i.e., the tax smoothing hypothesis. The study determines whether Pakistan has adopted a tax smoothing policy to overcome fiscal deficit and if so, what forms such policy has taken. The Wavelet Transformation is used for the first time to decompose the expenditure rate series into the permanent and transitory parts. The graphical and empirical analyses presented here reveal that Pakistan has tried to minimize the welfare cost of taxation but these policies have not followed best practices in tax smoothing elsewhere. The paper also makes some useful recommendations in this regard. It shows that in order to minimize the welfare cost of taxation the government should finance its permanent expenditure by increasing the tax rate while transitory shocks to the expenditures or output should be financed by creating public debt. The debt, so incurred, should, however, be contingent upon an emergency situation and retired when that emergency ends. It is asserted that if Pakistan’s fiscal policies are reformed along the lines suggested in this study it would lead to efficient and equitable policies which are based on robust theoretical and empirical foundations.